Bankrupt lender Genesis on Thursday settled a lawsuit with New York Attorney General Letitia James over its now-defunct Earn program.
The Earn program, operated jointly with Gemini Trust, offered customers up to 8% interest on crypto loans. But it was suspended amid the crypto market downturn in Nov. 2022.
James sued Gemini, Genesis and its parent company Digital Currency Group in October, alleging the Earn program caused investors over $1b in losses due to suspended withdrawals.
Thursday’s settlement specifies the return of assets to former Earn customers and other creditors linked to Genesis. Additionally, it permanently bars Genesis from operating in New York.
Genesis Global settles lawsuit with NY State, promising return of all state authority assets to Gemini Earn customers. Judgement due Feb 14. Digital Currency Group opposes. #GenesisGlobal #GeminiEarn #DigitalCurrencyGroup
— Sharpe Signals (@SharpeSignals) February 9, 2024
Approval from a bankruptcy judge is necessary for the deal to go through. The lender plans to seek approval from Judge Sean Lane on Feb. 14 for both the New York settlement and its liquidation plan.
DCG has opposed Genesis’ bankruptcy plans, claiming they violate the law and favor a select group of creditors.
Attorney General Targets Deceptive Earn Program
NYAG James accused Gemini of falsely promoting Earn as a “highly liquid investment” and misleading investors about Genesis’ financial stability. The attorney general argued that the firm was actually at a high risk of default, contrary to these claims.
The lawsuit also alleged that DCG collaborated with the companies to perpetuate the scheme.
Recently, Genesis separately settled with the Securities and Exchange Commission regarding a similar lawsuit over its Earn product. As part of the settlement, the SEC revealed that Genesis will pay $21m.
Genesis Agrees to $8M Fine and New York Exit Following SEC Lawsuit
The SEC sued the company in Jan. 2023, alleging that the lender commingled assets from its Earn program with funds from other customers.
Both Gemini and Genesis faced allegations of violating federal financial laws, with the SEC also accusing them of selling and offering unregistered securities. Genesis Global Trading, unrelated to the Earn program, agreed on Jan. 12 to pay an $8m fine to the New York Department of Financial Services. As per the deal, the company agreed to halt operations in New York and surrender its BitLicense.
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