Genesis Global Settlement Takes Place In Fraud Lawsuit

Key Points:

• Genesis settles a lawsuit with the New York Attorney General over alleged fraud in the Gemini Earn program, directing assets to former customers and creditors.
• The agreement follows a separate Genesis Global settlement with the SEC; Genesis denies wrongdoing but agrees to cease operations in New York.

According to Bloomberg, Genesis Global, a bankrupt crypto lender, has reached a settlement in a lawsuit brought by New York Attorney General Letitia James.

Genesis Resolves Legal Dispute with New York Attorney General

The lawsuit alleges fraud in the now-defunct Gemini Earn program, operated jointly with Gemini Trust. The Genesis Global settlement, subject to bankruptcy court approval, directs assets, potentially meant for state authorities, to former Earn customers and other creditors.

This agreement follows a separate Genesis Global settlement with the US Securities and Exchange Commission regarding the Earn program. The lawsuit, filed last October, accused Genesis, its parent company, Digital Currency Group, and Gemini of defrauding customers of $1.1 billion.

While the Genesis Global settlement resolves allegations against it, the companies deny wrongdoing, with Genesis agreeing to cease operations in New York.

Genesis Global Settlement Reached Over Alleged Fraud in Gemini Earn Program

New York authorities have offered to prioritize Genesis creditors in the repayment line, irrespective of payment form, whether crypto or cash. Genesis proposed returning frozen digital assets, possibly in Bitcoin, but a judge could mandate cash repayment.

Notably, major creditors agreed to value digital assets closer to current market rates, reflecting increased crypto prices since Genesis filed Chapter 11 in 2023. However, Digital Currency Group opposes Genesis’ liquidation plan, alleging unfair advantages for some creditors.

Genesis seeks court approval on February 14 for the New York settlement and liquidation plan. The Earn program, criticized by the SEC for offering unregistered securities, allowed interest payments through digital asset loans. Allegations included Gemini’s failure to disclose lending risks and concealment of losses after Three Arrows Capital‘s collapse.

Previously reported, Genesis sought bankruptcy court permission to liquidate shares in Grayscale trusts, estimated at $1.6 billion.