Genesis Global Settles SEC Lawsuit for $21 Million Amid Bankruptcy

Crypto lender Genesis Global Holdco, currently navigating bankruptcy proceedings, has reached a $21 million settlement with the United States Securities and Exchange Commission (SEC) over allegations related to its Gemini Earn program. The settlement, proposed in a Jan. 31 filing with the U.S. Bankruptcy Court for the Southern District of New York, aims to bring an end to the SEC’s civil lawsuit accusing Genesis of engaging in an unregistered offer and sale of securities.

The proposed settlement is part of Genesis Global Holdco’s Chapter 11 bankruptcy case, and a hearing is scheduled for Feb. 14 to officially recognize the agreement. According to the filing, the $21 million settlement is a result of extensive negotiations between Genesis and the SEC, offering benefits to the debtors’ estates by resolving the SEC’s claims and eliminating the risks associated with prolonged litigation.

The SEC’s lawsuit, filed in January 2023, targeted Genesis and Gemini Trust Company, alleging violations of U.S. securities laws through the Gemini Earn program between February 2021 and November 2022. Genesis, facing financial challenges, suspended withdrawals in November 2022 and filed for bankruptcy in January 2023. This led to legal entanglements involving Gemini, Genesis, and Digital Currency Group, the parent company.

The settlement, if approved, will result in Genesis paying $21 million to the SEC once all other allowed claims are fulfilled. This strategic move aims to settle the SEC’s claims and allows Genesis to focus on resolving its Chapter 11 bankruptcy case and repaying creditors.

Notably, the SEC’s actions against crypto firms are not isolated incidents. The financial regulator has been actively involved in legal battles with various crypto entities operating in the United States, including settlements with Bittrex and its former CEO William Shihara in August 2023, amounting to $24 million.

In a related development, Genesis Global Trading, a separate entity not involved in the Gemini Earn program, agreed to pay an $8 million penalty to the New York Department of Financial Services on Jan. 12. This settlement followed an investigation revealing significant failings in the firm’s Anti-Money Laundering and cybersecurity programs. As part of the agreement, Genesis Global Trading will cease operations in New York and surrender its BitLicense.

These settlements and legal actions come at a crucial time for Genesis, which has been grappling with financial challenges and legal complexities. The company’s agreement to settle outstanding regulatory issues suggests a commitment to restructuring and stabilizing its operations amid the uncertainties of the crypto market. As Genesis strives to resolve its legal hurdles, the outcome of the SEC settlement will significantly impact its path to recovery during the bankruptcy wind-down.