New York Attorney General Letitia James is settling with crypto lender Genesis for $2 billion to repay defrauded investors.
The company, once a business at the heart of Digital Currency Group, was among the multiple casualties in the industry contagion set off by the collapse of FTX. The firm filed for Chapter 11 bankruptcy protection in January 2023.
“This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice,” said James of the deal, which is the largest against a crypto firm in the state’s history.
“Once again, we see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry,” James added.
In October, James sued DCG, its Genesis subsidiary, and Gemini Trust, claiming that the two misled investors about the Gemini Earn program, leading to more than $1 billion in losses. The lawsuit was broadened in February, alleging that DCG and Genesis defrauded additional investors out of more than $2 billion.
Despite a legal challenge brought by parent company DCG, a bankruptcy court approved the lender’s Chapter 11 repayment plan, which included the settlement between James’ office and Genesis.
Genesis neither admits nor denies allegations detailed in the lawsuit, and the arrangement notably excludes Gemini.
The settlement bars Genesis from operating in New York. The settlement also established a fund for victims comprising at least 29,000 New York residents who collectively gave more than $1.1 billion to Genesis through its Gemini Earn product.
The Securities and Exchange Commission also filed suit against Genesis and its one-time partner, Gemini, over the unregistered offering and sale of securities. The bankruptcy court has also approved a separate settlement that ends this complaint.
The restructuring plan includes a repayment plan for customers who have had tokens frozen on the platform since withdrawals were halted in November 2022.
This fund will receive assets remaining in Genesis’s estate after initial bankruptcy distributions to creditors are made. According to the state attorney’s office, if those creditors are not made whole based on present digital asset values, the fund will receive up to $2 billion from Genesis’ remaining assets.