Genesis Global Settles Lawsuit with NY Attorney General
Genesis Global, a bankrupt crypto lender, has reached a settlement with New York Attorney General Letitia James over allegations of defrauding customers through its Earn program. The program allowed customers to earn interest by lending their digital assets, which the SEC considered an unregistered securities offering.
Details of the Settlement
The settlement agreement states that assets that could have been seized by state authorities will be returned to former Earn customers and other creditors associated with Genesis. This comes after Genesis reached a separate $21 million settlement with the U.S. Securities and Exchange Commission (SEC) regarding its Earn program.
The lawsuit filed by Attorney General James last October accused Genesis, its parent company Digital Currency Group, and Gemini of fraud amounting to $1.1 billion against customers. However, the settlement only addresses allegations against Genesis in the bankruptcy court.
Genesis Ceases Operations and Plans Liquidation
Although Genesis denies any wrongdoing, it has agreed to settle the claims without admitting liability. As part of the settlement, Genesis will stop operating in New York and undergo liquidation proceedings. The bankrupt crypto lender has also filed for asset sales, including a significant portion of its GBTC shareholdings.
New York Offers Help to Creditors
New York authorities have made a generous offer to creditors, regardless of whether they choose cryptocurrency or cash as repayment. Genesis has proposed returning Bitcoin and other digital tokens to affected clients, but the final decision rests with the judge who may require cash repayment instead.
A notable aspect is that major Genesis creditors have agreed to value digital assets closer to their current market prices. This adjustment accounts for the significant increase in cryptocurrency prices since Genesis filed for Chapter 11 bankruptcy in January 2023.
Opposition to the Liquidation Plan
Not all stakeholders agree with Genesis’ proposed liquidation plan. Digital Currency Group, the parent company, opposes the plan, arguing that it could unfairly benefit certain creditors in the Chapter 11 process.
Genesis will present its proposed liquidation plan to Judge Sean Lane of the New York bankruptcy court on February 14th for approval of both the settlement agreement and the proposed plan.
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