New York State Attorney General Letitia James settle down $2 billion in partnership with cryptocurrency lender Genesis to repay investors who were defrauded.
The company was once the core business of the digital currency group and was one of the many victims of the industry contagion triggered by the collapse of FTX. The company filed for Chapter 11 bankruptcy protection in January 2023.
“This historic settlement is an important step toward ensuring justice for the victims of Genesis,” James said of the deal, which is the largest against a cryptocurrency company in the state’s history.
James added: “Once again we are seeing the real consequences and harmful losses that can occur due to a lack of oversight and regulation in the cryptocurrency industry.”
In October, James filed a lawsuit DCG, its Genesis subsidiary and Gemini Trust allege that the two companies misled investors about the Gemini Earn program, resulting in losses of more than $1 billion.litigation expanded in Februaryaccusing DCG and Genesis of defrauding more investors of more than $2 billion.
Despite a legal challenge from parent company DCG, the bankruptcy court approved the lender’s Chapter 11 repayment plan, which included a settlement between James’ office and Genesis.
Genesis neither admits nor denies the allegations detailed in the lawsuit, and the arrangement specifically excludes Gemini.
The settlement prohibits Genesis from operating in New York. The settlement also establishes a fund for victims, made up of at least 29,000 New York residents who have collectively donated more than $1.1 billion to Genesis through its Gemini Earn products.
The U.S. Securities and Exchange Commission also filed suit against Genesis and its former partner Gemini for the unregistered issuance and sale of securities. The bankruptcy court also approved a separate settlement ending the complaint.
The restructuring plan includes a repayment plan for customers whose tokens have been frozen on the platform since withdrawals were stopped in November 2022.
The fund will receive the remaining assets from the Genesis estate following preliminary bankruptcy distributions to creditors. The fund will receive up to $2 billion from Genesis’ remaining assets if those creditors are not compensated based on current digital asset values, according to the state attorney’s office.
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