Genesis Global Settles Lawsuit with New York Attorney General
In a recent development, Genesis Global, the bankrupt cryptocurrency lender, has reached a settlement with New York Attorney General Letitia James. The lawsuit, which alleged fraud in Genesis’ Gemini Earn program, has been resolved without Genesis admitting liability. The settlement is subject to approval by a bankruptcy judge and aims to return assets to former Earn customers and other creditors. As part of the agreement, Genesis has agreed to cease conducting business in New York.
Details of the Settlement
The settlement exclusively addresses the allegations against Genesis and does not include its parent company, Digital Currency Group (DCG), or Gemini. The lawsuit initially accused Genesis, DCG, and Gemini of defrauding customers of $1.1 billion. However, the settlement focuses solely on Genesis.
Repayment Process for Creditors
New York authorities have offered to prioritize Genesis creditors in the Chapter 11 repayment process, regardless of whether the debt is repaid in cryptocurrency or cash. The judge will decide on the repayment method and may require repayment in cash, despite Genesis proposing to return Bitcoin and other tokens to clients.
Digital Asset Valuation
Major creditors have agreed to value digital assets closer to their current market value. This consideration takes into account the substantial increase in crypto prices since Genesis filed for Chapter 11. Other bankrupt cryptocurrency firms typically value digital assets at the time of filing for Chapter 11.
Opposition to Liquidation Plan
Digital Currency Group opposes the proposed liquidation plan, arguing that it would unfairly benefit some creditors in Chapter 11. The approval of both the New York settlement and the proposed liquidation plan will be sought from Judge Sean Lane on February 14.
The Gemini Earn Program
The Gemini Earn program allowed customers to earn interest payments by lending their digital assets. The US Securities and Exchange Commission (SEC) alleged that this constituted the offering of unregistered securities. Attorney General James accused Gemini of failing to disclose lending risks and accused Genesis and Digital Currency Group of attempting to conceal over $1 billion in losses following the collapse of crypto hedge fund Three Arrows Capital (3AC).
Conclusion
The settlement between Genesis Global and New York Attorney General Letitia James marks a significant development in the legal proceedings surrounding the fraud allegations in the Gemini Earn program. The approval of the settlement and the proposed liquidation plan will determine the future course for Genesis and its creditors.
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