Genesis to return assets after NY settlement on crypto Earn

In this post:

  • Genesis Global has settled with NY Attorney General Letitia James over its halted Earn program, promising up to 8% interest on crypto loans.
  • The agreement requires Genesis to return assets to its former Earn customers and other creditors, marking a significant move toward investor recovery.
  • As part of the settlement, Genesis will face a permanent ban on its operations within New York State, pending approval from a bankruptcy judge.

Genesis Global, a bankrupt cryptocurrency lender, has settled with New York Attorney General Letitia James concerning its defunct Earn program. The agreement, announced on Thursday, resolves a lawsuit by James, which accused Genesis and its partners, including Gemini Trust and parent company Digital Currency Group (DCG), of causing significant financial losses to investors through the Earn program. This program, which promised customers up to 8% interest on crypto loans, was halted during the cryptocurrency market downturn in November 2022, leading to over $1 billion in investor losses due to suspended withdrawals.

Genesis settlement details and future implications

Under the settlement terms, Genesis is required to return assets to former Earn customers and other creditors. Additionally, the agreement imposes a permanent ban on Genesis’s operations within New York State. However, the settlement’s enactment is contingent upon approval from a bankruptcy judge. Genesis aims to secure this approval from Judge Sean Lane on February 14, alongside authorization for its liquidation plan. This development marks a significant step in addressing the fallout from the Earn program’s suspension and provides a pathway for affected investors to recover their assets.

The settlement also highlights ongoing tensions between Genesis and DCG, with the latter opposing the bankruptcy plans. DCG argues that the proposed plans are unlawful and unfairly prioritize certain creditors over others. This internal conflict underscores the cryptocurrency industry’s complex challenges, particularly in the wake of significant market downturns.

Regulatory actions and broader industry impact

The lawsuit and subsequent settlement with the New York Attorney General’s office underscore the heightened regulatory scrutiny facing the cryptocurrency sector. Attorney General Letitia James accused Gemini of misleadingly promoting the Earn program as a “highly liquid investment” and falsely representing Genesis’s financial stability. These allegations suggest a significant risk of default, contrary to the firms’ assurances to investors. The case also implicated DCG in facilitating the alleged scheme, highlighting concerns over corporate governance and transparency within the cryptocurrency industry.

Furthermore, Genesis’s legal challenges extend beyond the New York Attorney General’s lawsuit. The company recently settled with the Securities and Exchange Commission (SEC) over similar allegations about its Earn product. As part of the settlement, Genesis agreed to pay $21 million. This follows a separate action in January 2023, where the SEC accused Genesis of commingling Earn program assets with other customer funds, raising questions about the firm’s operational integrity and compliance with federal financial laws.

The settlement between Genesis Global and New York Attorney General Letitia James is pivotal in addressing the repercussions of the Earn program’s failure. It provides a mechanism for compensating affected investors and reinforces the importance of regulatory compliance and transparency within the rapidly evolving cryptocurrency industry.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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