Genesis reaches $2 billion settlement with New York AG's office

Author: Ronaldo Marquez Source: bitcoinist Translation: Shan Ouba, Golden Finance

The New York Attorney General's Office has reached a $2 billion settlement with the bankrupt cryptocurrency lending platform Genesis Global Capital. The settlement, which has been approved by a federal bankruptcy judge, will establish a victims fund to compensate thousands of New Yorkers and other investors who lost funds through the Genesis platform.

Genesis was ordered to pay up to $2 billion in compensation to victims

New York Attorney General Letitia James announced the agreement on Monday,calling it the largest settlement ever obtained by the state against a cryptocurrency company. The settlement resolves allegations that Genesis and its affiliates concealed more than $1.1 billion in losses from investors who participated in the company's "Gemini Earn" program. "When investors suffer losses due to fraud and manipulation, they deserve compensation. This historic settlement is an important step in ensuring that victims who invested in Genesis receive some measure of justice," Attorney General James said. The settlement follows a lawsuit filed by the Attorney General's Office in October 2023, alleging that Genesis and other defendants defrauded hundreds of thousands of investors nationwide. The lawsuit was later expanded in February to target Genesis' parent company Digital Currency Group (DCG), its CEO Barry Silbert, and Genesis' former CEO Soichiro Shigeno. Under the terms of the agreement, the cryptocurrency lending company will not admit any wrongdoing. But the lawsuit against the remaining defendants and Genesis' former business partner Gemini Trust Company will continue. The $2 billion settlement will establish a “victims fund” to pay the company’s creditors, including at least 29,000 New Yorkers who contributed more than $1.1 billion to the company’s Gemini Earn program. If the assets remaining in the Genesis bankruptcy estate are insufficient to fully compensate these creditors, the settlement requires Genesis to pay up to an additional $2 billion to the fund.

New York Attorney General Promises Tighter Crypto Regulation

Genesis’ collapse is closely tied to the high-profile collapse of cryptocurrency exchange FTX and its sister trading firm Alameda Research in late 2022. Prior to bankruptcy, the firm reportedly provided millions of dollars in unsecured loans to Alameda and a $2.4 billion loan to now-defunct cryptocurrency hedge fund Three Arrows Capital.

As Bitcoinist reported, the Genesis repayment plan approved by the bankruptcy court on Friday also represents a significant step forward in efforts to recover funds for victims of recent turmoil in the cryptocurrency industry.

Attorney General James pledged to continue her office’s work to increase regulation and oversight in the cryptocurrency space, which has resulted in over $2.5 billion in settlements to date from other predatory platforms.

"Once again, we are seeing the real-world consequences and losses that can occur in the cryptocurrency industry due to a lack of regulation and oversight. New York investors deserve the peace of mind that comes with a properly regulated marketplace, and that is something my office will always work to achieve," James concluded.