In a significant development within the cryptocurrency sector, Genesis Global Holdco has agreed to a $21 million settlement with the U.S. Securities and Exchange Commission (SEC). This resolution relates to a civil lawsuit over allegations that the company, which is a subsidiary of Digital Currency Group (DCG), violated securities laws through its lending program associated with the crypto exchange Gemini.
The Path to Settlement
Documents from the Southern District of New York bankruptcy court, dated January 31, reveal that Genesis will pay the penalty after the resolution of secured and unsecured claims. This arrangement is part of the company’s ongoing bankruptcy proceedings and follows extensive negotiations with the SEC. The agreement is poised to benefit Genesis’s debtors’ estates by mitigating the risks of an extended litigation process.
A Brief History of the Dispute
The lawsuit’s origins trace back to last year when the SEC initiated legal action against both Genesis and Gemini. The accusation was that they offered unregistered securities to investors through the Gemini Earn product. This legal strife came to the forefront as Gemini accused Genesis, along with its parent company DCG and Barry Silbert, of fraudulent activities.
Wider Implications and Additional Settlements
The collapse of Sam Bankman-Fried’s FTX exchange last year exposed a network of dubious business dealings, placing Genesis and DCG at the center of multiple legal challenges. In addition to the SEC settlement, Genesis has also resolved disputes with DCG and has settled cases with the New York Department of Financial Services. The New York authorities had pursued a $1 billion lawsuit against Genesis, Gemini, and DCG, alleging fraud and criminal misconduct.
Consequences and Compliance
As part of the settlement terms with New York regulators, Genesis has agreed to surrender its BitLicense, cease all business activities within the state, and pay a fine of $8 million. These measures underscore the company’s efforts to comply with regulatory standards and move forward from the legal challenges it has faced.
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