Genesis Global Settles $1B New York Court Lawsuit Over Customer Crypto Fraud
Genesis Global settled a lawsuit filed by Letitia James, allegeding over $1 billion in fraud of the terminated Gemini Earn program.
Digital Currency Group’s subsidiary Genesis Global reached a settlement in a lawsuit filed by New York’s Attorney General, Letitia James, accusing the bankrupt cryptocurrency lender of defrauding customers participating in its terminated Gemini Earn program, operated in conjunction with Gemini Trust Co.
On February 14th, Genesis will seek approval of a debt repayment plan.
In October 2023, New York’s Attorney General, Letitia James, filed a lawsuit against cryptocurrency companies Genesis Global and its parent company, DCG, as well as Gemini, accusing them of “defrauding” investors of over $1 billion.
Through the lawsuit, Attorney General James seeks restitution for investors, “disgorgement of ill-gotten gains, ” and a ban on all three entities from participating in the financial investment industry in New York.
However, the settlement disclosed in New York bankruptcy court today addresses only the allegations against Genesis, as outlined in court documents.
Additionally, the agreement with Attorney General James redirects assets, originally destined for state authorities, to former Earn customers and other Genesis creditors. Pending approval by a bankruptcy judge, this settlement follows a prior resolution of a separate complaint regarding the Earn program by the US Securities and Exchange Commission (SEC).
While the companies deny wrongdoing, Genesis is opting to settle the allegations without admitting liability. Additionally, Genesis has committed to ceasing operations in New York as it proceeds with liquidation.
Genesis Creditors May Receive Bitcoin Repayment
New York authorities have proposed prioritizing Genesis creditors in the Chapter 11 repayment queue, regardless of whether the lender repays debts in cryptocurrency or fiat currency, as reported by Bloomberg. Genesis has suggested returning Bitcoin and other tokens to clients affected by the bankruptcy, though a judge may mandate repayment in cash.
Furthermore, major Genesis creditors have agreed to revised valuation procedures for digital assets, reflecting their increased market value since the Chapter 11 filing in January 2023. This contrasts with other bankrupt cryptocurrency firms, which valued digital assets at the time of filing.
Digital Currency Group opposes Genesis’ proposed liquidation plan, citing concerns over the preferential treatment of certain creditors in Chapter 11. Independently managed in bankruptcy proceedings, Genesis plans to seek approval for the New York settlement and the liquidation plan from Judge Sean Lane on February 14.
The Earn program, criticized by the SEC for offering unregistered securities, permitted customers to earn interest by loaning their digital assets. James accused Gemini of inadequate risk disclosure regarding Earn program lending and alleged Genesis and Digital Currency Group attempted to conceal over $1 billion in losses following the collapse of cryptocurrency hedge fund Three Arrows Capital – all these are the claims the companies deny.
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