Genesis Global, a bankrupt cryptocurrency lender, has come to a resolution with New York Attorney General Letitia James regarding allegations of fraudulent activities related to its Gemini Earn program.
The recent settlement is aimed at repatriating assets to former Earn customers and other creditors of Genesis, pending approval by a bankruptcy judge.
The lawsuit, initiated by James in October against Genesis, Digital Currency Group (its parent company), and Gemini, accused the entities of deceiving customers, leading to significant losses amounting to $1.1 billion. However, the recent settlement focuses solely on the allegations against Genesis.
As per the settlement terms, Genesis has agreed to a deal without admitting any wrongdoing and has announced its decision to discontinue operations in New York. The company, intending to wind up its affairs, has also outlined a plan to reimburse digital assets like Bitcoin to its clients, subject to potential cash repayment as determined by a judge. Additionally, the insolvent cryptocurrency lender has initiated asset sales while divesting a substantial portion of its GBTC shareholdings.
New York authorities have proposed prioritizing Genesis creditors in the Chapter 11 repayment process, whether in cryptocurrency or cash, following Genesis’s separate $21 million settlement with the SEC over its Earn program, which reportedly involved unregistered securities offerings.
The agreement underscores a commitment to valuing digital assets closer to current market values for repayment purposes, a position supported by major Genesis creditors. This diverges from the approach taken by other bankrupt cryptocurrency firms, which typically value assets at the time of their Chapter 11 filings.
However, Genesis’s proposed liquidation plan has encountered opposition from Digital Currency Group, which argues that the plan could unfairly favor certain creditors during the Chapter 11 proceedings.
Genesis is slated to present its liquidation plan to Judge Sean Lane on Feb. 14, seeking approval for both the New York settlement and the liquidation strategy.
The Earn program enabled customers to earn interest by lending their digital assets, a practice that the SEC equated to selling unregistered securities. Attorney General James accused Gemini of failing to fully disclose the risks associated with the Earn program.
Moreover, James alleged that Genesis and Digital Currency Group sought to conceal losses exceeding $1 billion following the collapse of the crypto hedge fund Three Arrows Capital, a claim disputed by both companies.
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Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.
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