Genesis Global, a bankrupt bitcoin lender, and New York Attorney General Letitia James have agreed with claims that Genesis Global misled customers through its now-canceled Gemini Earn program.
Pending approval by a bankruptcy judge, the most recent arrangement seeks to return assets to former Earn customers and other Genesis creditors. James sued Genesis, Digital Currency Group (its parent business), and Gemini in October, claiming the companies had deceived clients into losing $1.1 billion.
However, the new court settlement solely deals with Genesis’s allegations. As per the conditions of the settlement, Genesis has said it will stop its operations in New York and agreed to a deal without acknowledging any liability.
Although a judge may find that payment in cash is appropriate, the company, which is about to liquidate, has also suggested a strategy to restore digital assets, such as Bitcoin, to its clients.
The insolvent cryptocurrency lender recently sold a sizable portion of its GBTC shareholdings and filed for asset sales. Authorities in New York have suggested prioritizing Genesis creditors during the Chapter 11 repayment procedure, regardless of whether payments are paid in cash or cryptocurrency.
Genesis and the SEC obtained a separate $21 million settlement concerning Genesis’ Earn program, which allegedly involved unregistered securities offers, prior to this.
Major Genesis creditors appreciate the agreement’s pledge to value digital assets closer to current market values for repayment purposes. In contrast, numerous insolvent cryptocurrency companies valued their assets at the time of their Chapter 11 petitions.
However, Digital Currency Group has objected to Genesis’s suggested liquidation plan. The main business contends that the proposal would unfairly benefit some creditors throughout the Chapter 11 procedure.
Judge Sean Lane will hear Genesis’ liquidation proposal on February 14. During the presentation, permission for the liquidation plan as well as the New York settlement will be requested.
Customers could earn interest by lending their digital assets as part of the Earn program; the SEC said this conduct was the same as selling unregistered securities.
Attorney General James accused Gemini of adequately disclosing the dangers involved in the Earn program. In addition, James claimed—an allegation both Genesis and Digital Currency Group have denied—that they attempted to conceal losses totaling more than $1 billion following the collapse of the cryptocurrency hedge fund Three Arrows Capital.
