Genesis Settles $1B Crypto Fraud Case with NY AG Office

Genesis moves to close its tumultuous legal saga by agreeing to settle with the New York Attorney General’s office.

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  • Genesis has reached a settlement deal with the NY AG office. 
  • Genesis’ settlement bears an interesting structure that benefits debtors. 
  • The settlement will resolve all allegations against the crypto lender. 

In October last year, defunct crypto lender Genesis found itself in the crosshairs of a sweeping lawsuit by New York Attorney General (NY AG) Letitia James, who alleged the firm and its collaborators jointly defrauded investors for over $1 billion. 

In a surprising turn of events, just as Genesis moves to clear its name and resolve its debt, the defunct crypto lender surprised everyone by agreeing to settle the case, thus bringing the tumultuous legal saga to a close, at least for now. 

Genesis Reaches Settlement 

On Thursday, February 8, Bankrupt crypto firm Genesis Global and the New York Attorney General’s Office reached a settlement deal after being sued last year for defrauding New York investors through its now-terminated Gemini Earn program.

The NY AG alleged Genesis Global, along with its parent company Digital Currency Group (DCG) and Gemini, defrauded 230,000 investors, including at least 29,000 residents of New York, by concealing the risks associated with the Earn program.

Genesis Global filed a motion in the Bankruptcy Court, seeking approval for the settlement. The crypto lender shared that the settlement would enable debtors to avoid “extensive litigation costs” and focus on maximizing recoveries for creditors.

While court documents do not confirm if Genesis will pay a fine to the NY AG, the settlement bears an interesting structure that appears to favor debtors over the state.

Genesis’ Interesting Settlement Structure

Genesis’ settlement with NY AG Letitia James is structured to prioritize returning assets to former Earn customers and other Genesis creditors rather than allocating them to state authorities.

According to court documents revealed on Thursday, the settlement only resolves allegations against the crypto lender brought by the NY AG office.

Genesis has agreed to settle the allegations without admitting liability despite denying wrongdoing. Additionally, as part of the settlement, the crypto lender, which plans to liquidate, has decided to cease operations in New York.

On the Flipside

  • Digital Currency Group opposes Genesis’ proposed liquidation plan, citing concerns about unfair advantages for certain creditors in Chapter 11.
  • On February 14, Genesis is scheduled to seek court approval from Judge Sean Lane for the New York settlement and the liquidation plan.
  • Digital Currency Group has stated that it has repaid all short-term loans from its bankrupt subsidiary Genesis, totaling over $700 million. 

Why This Matters

The settlement represents a significant milestone for Genesis and its creditors, marking a crucial juncture in the company’s efforts to navigate bankruptcy proceedings and its commitment to providing restitution to those affected by the Earn Program.

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Author
Insha Zia

Insha Zia is a senior journalist at DailyCoin covering crypto developments, especially in the Cardano ecosystem. With a Bachelor of Science in Computer Systems Engineering, he delivers high-quality articles with his technical background and expertise in data analysis and programming languages, aiming to educate and inform readers accurately, transparently, and engagingly. Insha believes education can drive mass adoption of the crypto space, and he is committed to giving DailyCoin readers a better understanding of the technology.