Key Points:

  • New York State Attorney General Letitia James reached a historic $2 billion settlement with crypto lender Genesis.

  • The Genesis settlement prohibits Genesis from operating in New York and establishes a victims' fund for affected residents.

According to CNBC, New York State Attorney General Letitia James announced a landmark $2 billion settlement with crypto lender Genesis to address losses suffered by deceived investors.

Landmark Settlement: NY Attorney General Resolves $2B Genesis Case

Genesis settlement, the largest of its kind in the state's crypto history, resolves a lawsuit filed by James in October against Digital Currency Group (DCG), Genesis, and Gemini Trust. The lawsuit alleged that the companies misled investors regarding the Gemini Earn project, resulting in over $1 billion in losses.

Genesis, once a pivotal business under DCG, filed for Chapter 11 bankruptcy protection in January 2023 following the fallout from FTX's collapse. The settlement prohibits Genesis from operating in New York and establishes a victims' fund for more than 29,000 affected New York residents who invested through Gemini Earn products.

Attorney General James hailed the Genesis settlement as a significant step toward justice for Genesis investors. She emphasized the consequences of insufficient oversight and regulation in the cryptocurrency industry, highlighting the real-world losses incurred by investors. Despite legal challenges from DCG, the bankruptcy court approved Genesis's Chapter 11 repayment plan, which included the settlement with James's office.

Genesis Settlement Terms and Regulatory Impact

Notably, Genesis neither admits nor denies the allegations outlined in the lawsuit, and the settlement excludes Gemini. The Securities and Exchange Commission also filed a suit against Genesis and Gemini over the unregistered sale of securities, with a separate settlement approved by the bankruptcy court.

The restructuring plan includes a repayment scheme for customers affected by frozen tokens on the platform since November 2022. The remaining assets in Genesis's estate, after initial distributions to creditors, will fund the victims' fund. If creditors are not fully compensated based on current digital asset values, the fund will receive up to $2 billion from Genesis's remaining assets, according to the state attorney's office.

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