New York Attorney General Secures $2B Settlement From Failed Crypto Lender Genesis for Victims

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Tanzeel Akhtar

Journalist

Tanzeel Akhtar

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Tanzeel Akhtar has been covering the cryptocurrency and blockchain sector since 2015. She has written for the Wall Street Journal, Bloomberg, CoinDesk, Bitcoin Magazine and Bitcoin.com.

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May 21, 2024 04:16 EDT

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New York Attorney General announced it has secured $2 billion from the bankrupt cryptocurrency firm Genesis Global to help pay back defrauded victims.

In an announcement, the New York Attorney General said the settlement would be used to form a “victim’s fund” to help defrauded investors. This will include payouts to at least 29,000 New Yorkers, who contributed more than $1.1 billion to Genesis through the Gemini Earn investment program. Genesis has also been banned from ever operating in New York.

Biggest Settlement Against a Crypto Firm in New York

The $2 billion settlement is the largest against a crypto firm in New York state history. Triggered by this the New York Attorney General said it plans to increase oversight and regulation of the digital assets industry which has secured more than $2.5 billion from predatory crypto platforms to date.

“This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice,” said Attorney General of New York, Letitia James.

“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,” added Attorney General James.

Attorney General James is urging New Yorkers affected by deceptive conduct in the crypto space to report these issues and those who have witnessed misconduct or fraud to file an online whistleblower complaint.

DCG’s Court Challenge Dismissed

In February, Digital Currency Group (DCG) opposed the bankruptcy plans of its subsidiary Genesis, arguing that it goes against the law and favours a small group of creditors. In a court filing, the company asked the court not to approve the Revised Plan submitted by Genesis for multiple reasons, including violating the Bankruptcy Code as the lengthy process drags on.

In May, Judge Lane dismissed DCG’s legal challenge, stating that Genesis’ parent company lacked the authority to contest the Chapter 11 plan. As an equity holder of Genesis, DCG stands last in line for repayment, according to Judge Lane. The judge noted that creditors are prioritized ahead of DCG and are not receiving full repayment.

In February, Genesis received approval to sell its Grayscale Bitcoin Trust (GBTC) shares valued at more than $1.3b, as part of efforts to repay customers.