Bankrupt Crypto Lender Genesis Settles Lawsuit with NY Attorney General
Bankrupt lender Genesis has reached a settlement with New York Attorney General Letitia James over its defunct Earn program. The program, which offered customers up to 8% interest on crypto loans, was suspended during the crypto market downturn in November 2022.
James filed a lawsuit against Gemini Trust, Genesis, and Digital Currency Group in October, alleging that the Earn program caused investors over $1 billion in losses due to suspended withdrawals.
Settlement Details and Permanent Ban
The settlement requires Genesis to return assets to former Earn customers and other creditors associated with the company. Additionally, it permanently prohibits Genesis from operating in New York.
Approval from Bankruptcy Judge Required
The settlement still needs approval from a bankruptcy judge. Genesis plans to seek approval from Judge Sean Lane on February 14 for both the New York settlement and its liquidation plan.
Digital Currency Group has opposed Genesis’ bankruptcy plans, claiming they violate the law and favor a select group of creditors.
Attorney General Targets Deceptive Earn Program
New York Attorney General Letitia James accused Gemini of falsely promoting the Earn program as a “highly liquid investment” and misleading investors about Genesis’ financial stability. The lawsuit also alleged collaboration between DCG and the companies involved in perpetuating the scheme.
Genesis recently settled with the Securities and Exchange Commission (SEC) over a similar lawsuit regarding its Earn product. As part of the settlement, Genesis will pay $21 million to the SEC.
Genesis Agrees to $8M Fine and New York Exit Following SEC Lawsuit
The SEC sued Genesis in January 2023, accusing the lender of commingling assets from the Earn program with funds from other customers. Both Gemini and Genesis faced allegations of violating federal financial laws, with the SEC also accusing them of selling and offering unregistered securities.
Genesis Global Trading, unrelated to the Earn program, agreed to pay an $8 million fine to the New York Department of Financial Services and halt operations in New York.
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