A New York bankruptcy judge has approved a $2 billion settlement between the New York State Attorney General’s office and crypto lender Genesis, marking the largest settlement against a crypto firm in the state’s history.
The settlement was approved months after Genesis Global Holdco filed a motion in the U.S. Bankruptcy Court for the Southern District of New York in February, asking Judge Sean Lane to approve the agreement.
“When investors suffer losses because of fraud and manipulation, they deserve to be made whole,” said New York Attorney General Letitia James in a statement on Monday. “This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice.”
The settlement includes the creation of a victim fund to help New York investors who contributed more than $1.1 billion to Genesis through the Gemini Earn program.
New York Attorney General Letitia James sued Gemini, Genesis, and later its parent company, Digital Currency Group (DCG), over a Gemini crypto lending program. Genesis and Gemini began offering the program to retail investors in 2021, promising returns of up to 7.4% APY.
Genesis Global Holdco filed for bankruptcy protection in January 2023 after suffering massive financial losses from the collapses of crypto hedge fund Three Arrows Capital and crypto exchange FTX in 2022.
Genesis neither admits nor denies the allegations in the lawsuit, and the suit will continue against the other defendants, including Gemini, according to the NYAG’s statement.
“Our goal throughout this process has been to maximize value for all creditors, and we are gratified that the court approved both our [bankruptcy plan] and the NYAG settlement agreement,” said Genesis interim CEO Derar Islim.
Broader context
The settlement requires the funds to be returned to Genesis investors and bans the company from operating in New York. James claimed Genesis had been “lying and cheating investors” who sent more than $1.1 billion to the platform through the Gemini Earn program.
The lawsuit against Genesis was initially filed by the New York Attorney General’s office in October 2023 and later expanded to include DCG, its CEO Barry Silbert, and former Genesis CEO Soichiro Moro.
This settlement is part of a series of lawsuits brought by the New York Attorney General against crypto firms operating in the state. In 2023, James’ office filed a suit against KuCoin for operating as an unregistered exchange and settled with the firm for $22 million. The New York AG also sued former Celsius CEO Alex Mashinsky for hiding the platform’s “dire financial condition.” Mashinsky faces criminal charges related to securities fraud, wire fraud, and conspiracy to commit fraud, with his trial expected in January 2025.
