Genesis Settles SEC Lawsuit: $21 Million Agreement

In a recent development, failed crypto lender Genesis has agreed to pay a substantial $21 million to settle a 2023 federal lawsuit accusing the company of selling unregistered securities. The agreement, disclosed in a Wednesday filing at the U.S. Bankruptcy Court in the Southern District of New York, outlines Genesis’ resolution with the Securities and Exchange Commission (SEC).

Allegations and Lawsuit

• The SEC initiated legal action against Genesis in January of the previous year, contending that the company amassed billions of dollars in crypto from numerous investors through an unregistered securities offering.
• The SEC’s complaint highlighted the period between February 2021 and November 2022, during which GGC and Gemini Trust Company, LLC allegedly sold securities to U.S. retail investors under the Gemini Earn program.

Settlement Details

• The settlement terms dictate that the SEC will hold an allowed general unsecured claim worth $21 million against GGC.
• Genesis has committed to pay the agreed sum to the SEC once prior service users are reimbursed.

Background and Implications

• As a subsidiary of Digital Currency Group (DCG), Genesis suffered significant setbacks following the downfall of FTX and eventually filed for bankruptcy post the SEC’s lawsuit.
• Operating as a key collaborator with Gemini for its Earn program, Genesis enabled users to earn interest on their crypto, facing complications after FTX’s collapse and subsequently halting customer withdrawals.
• Creditors have been awaiting reimbursements since the company’s demise, with DCG assuring that creditors will receive their dues in full.

The settlement not only signifies a resolution to the legal dispute between Genesis and the SEC but also sheds light on the challenges faced by crypto companies in a volatile market environment.