Genesis Global Settles with NY Attorney General Over Alleged Fraud
Genesis Global, a bankrupt cryptocurrency lender, has reached a settlement with New York Attorney General Letitia James over allegations of defrauding customers through its now-defunct Gemini Earn program. The settlement aims to return assets to former Earn customers and other Genesis creditors, pending approval by a bankruptcy judge.
Lawsuit Accuses Genesis of Misleading Customers
A lawsuit filed by James in October against Genesis, Digital Currency Group (its parent company), and Gemini accused the firms of misleading customers, resulting in losses of $1.1 billion. The recent court settlement, however, only addresses the claims against Genesis.
Genesis Agrees to Settlement Terms
Under the settlement terms, Genesis has agreed to a deal without admitting any liability and announced it will cease its operations in New York. The company plans to liquidate and has proposed a plan to return digital assets like Bitcoin to its clients, although a judge might decide on repayment in cash. Genesis also recently filed for asset sales while selling a large part of its GBTC shareholdings.
Priority for Genesis Creditors Proposed
New York authorities have proposed prioritizing Genesis creditors in the Chapter 11 repayment process, whether the repayments are made in cryptocurrency or cash. This move is supported by major Genesis creditors and aims to value digital assets closer to current market values for repayment purposes.
Resistance from Digital Currency Group
The proposed liquidation plan by Genesis has faced resistance from Digital Currency Group. The parent company argues that the plan could give certain creditors an unfair advantage during the Chapter 11 process.
Judge’s Approval Needed for Liquidation Plan
Genesis is scheduled to present its liquidation plan to Judge Sean Lane on Feb. 14, seeking approval for both the New York settlement and the liquidation strategy.
Allegations Against Gemini and Disclosure Issues
The Earn program allowed customers to earn interest by lending their digital assets, a practice the SEC claimed was equivalent to selling unregistered securities. Attorney General James charged Gemini with not fully disclosing the risks associated with the Earn program.
James also alleged that Genesis and Digital Currency Group attempted to hide over $1 billion in losses after the failure of the crypto hedge fund Three Arrows Capital, a claim both companies have denied.
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