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New York Attorney General Letitia James has announced a $2 billion settlement with Genesis to repay defrauded investors
Genesis filed for Chapter 11 bankruptcy protection in January 2023
The company recently won a legal ruling against DCG to distribute payouts to Gemini Earn customers
New York Attorney General Letitia James has announced a historic $2 billion settlement with crypto lender Genesis which will help repay defrauded investors. Genesis, once a cornerstone of the Digital Currency Group (DCG), was among the firms affected by the industry contagion following the collapse of FTX. The company filed for Chapter 11 bankruptcy protection in January 2023, and it was revealed yesterday that it had won a legal ruling against its parent company DCG to distribute payouts to Gemini Earn customers.
Scope of Lawsuit Was Expanded
James sued DCG, its Genesis subsidiary, and Gemini Trust in October 2023, accusing them of misleading investors about the Gemini Earn program, which resulted in over $1 billion in losses. The lawsuit was expanded in February, alleging that DCG and Genesis defrauded additional investors out of more than $2 billion.
Despite a legal challenge from DCG, a bankruptcy court approved Genesis’s Chapter 11 repayment plan, which included the settlement with James’ office. Genesis did not admit to or deny the allegations but agreed to the terms, which notably exclude Gemini.
The settlement prohibits Genesis from operating in New York and establishes a fund for victims, including at least 29,000 New York residents who collectively lost over $1.1 billion through the Gemini Earn product. The Securities and Exchange Commission has also filed a suit against Genesis and Gemini over the unregistered offering and sale of securities, with the bankruptcy court approving a separate settlement to resolve this complaint.
James Heralds “Historic Settlement”
In a statement, James heralded the result for customers:
When investors suffer losses because of fraud and manipulation, they deserve to be made whole. This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice. Once again, we see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry. New York investors deserve the peace of mind that comes from a properly regulated marketplace, and that is something my office will always act to achieve.
Under the restructuring plan, customers who have had tokens frozen on the platform since November 2022 will be included in the repayment plan. This fund will receive assets from Genesis’s estate after initial bankruptcy distributions to creditors.
If these creditors are not fully compensated based on current digital asset values, the fund will receive up to $2 billion from Genesis’s remaining assets, ensuring that defrauded investors receive some measure of restitution.
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