Genesis Global Holdco Settles with NYAG, but Faces Expanded Complaint

Additional legal documents increase the financial requests of the New York Attorney General against cryptocurrency companies Gemini and Genesis, following a finalized agreement with one of the defendants the day before.

NY Attorney General case against Genesis, Gemini faces shake-up with new filings

On February 8, the New York State Office of the Attorney General (NYAG) settled with Genesis Global Holdco in a proposed motion in its case surrounding the Gemini Earn program. However, the following day, the NYAG filed a new, expanded complaint in the case, naming Genesis Global Holdco and all its codefendants.

📜 Settlement Agreement and Payment Distribution

The Genesis holding company filed a motion for the New York Southern District Bankruptcy Court to approve a settlement agreement between it and the NYAG on Feb. 8. The settlement is the “product of extensive negotiation,” the filing said.

Under the Genesis settlement, the NYAG will receive payment on its claims on equal footing with the United States Securities and Exchange Commission (SEC), but only after payments to creditors. Notably, Genesis settled with the SEC for $21 million on Jan. 31. Both settlements will be considered by the court on Feb. 14.

Source: Pacer

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💼 Accusations of Fraud

In October, New York Attorney General Letitia James filed suit against Genesis Holdco, Genesis Global Capital, Genesis Asia Pacific, their parent company Digital Currency Group (DCG), cryptocurrency exchange Gemini, former Genesis CEO Michael (Soichiro) Moro, and DCG CEO Barry Silbert for fraud in connection with the Gemini Earn program. The NYAG accused the parties of defrauding more than 230,000 investors, including 29,000 New Yorkers, of over $1 billion.

⚖️ Expanded Claims and Allegations

On Feb. 9, James announced that the NYAG was expanding its claims against DCG, Silbert, and Moro. Additional investors who had lost funds were discovered, bringing the total number of defrauded investors to more than 230,000 and the amount to over $3 billion.

Despite the settlement reached a day earlier, Genesis Holdco (as one of the “Genesis/DCG Defendants”) is mentioned in five of the ten causes of action in the new complaint. The amended complaint reveals that Gemini solicited money from the public with false assurances of a highly liquid investment through the Gemini Earn program.

However, Gemini’s confidential risk reports showed that Genesis Capital, which facilitated the program, posed a high risk of default. Furthermore, claims that the Genesis loan book was overcollateralized were false, and a significant portion of Gemini customers’ funds were invested in FTX-affiliated Alameda Research. The collapse of Three Arrows Capital also caused losses for Genesis. The NYAG seeks a permanent injunction against the defendants operating related businesses in New York and the disgorgement of illegally obtained funds.

🚀 Genesis and Gemini’s Troubled Partnership

Gemini and Genesis jointly launched the Gemini Earn program in 2021. However, the program faced multiple setbacks, with Genesis suspending withdrawals in November 2022 and filing for bankruptcy in January 2023. This led to a series of legal actions, including the SEC filing a complaint against Gemini and Genesis. Gemini filed lawsuits against Genesis, and in January, Genesis reached an agreement with the New York Department of Financial Services for its anti-money laundering failings and weak cybersecurity. As part of the agreement, Genesis lost its New York BitLicense.

📚 Further Reading

For more on Genesis Global Holdco and related topics, check out these articles: – Genesis bankruptcy plan overpays customer claims, DCG says – Canadian crypto exchange halts withdrawals, trading amid security breach – Celsius files intent to claw back certain pre-bankruptcy withdrawals – Crypto use for money laundering far below cash: US Treasury

❓ Q&A

Q: How did the NYAG expand its claims against Genesis Holdco?

A: The NYAG discovered additional investors who had lost funds, leading to an expansion of the claims against Genesis Holdco, DCG, Silbert, and Moro. The total number of defrauded investors has now surpassed 230,000, with losses exceeding $3 billion.

Q: What were the false assurances provided by Gemini for the Gemini Earn program?

A: Gemini solicited funds from the public, falsely claiming that the Gemini Earn program was a highly liquid investment and that Genesis Capital, the facilitator of the program, was creditworthy. However, confidential risk reports revealed that Genesis Capital posed a high risk of default.

Q: What actions is the NYAG seeking against the defendants?

A: The NYAG is seeking a permanent injunction to prevent the defendants from operating related businesses in New York. Additionally, the NYAG aims to recover illegally obtained funds through disgorgement and repayment to defrauded investors.

Q: How has the troubled partnership between Genesis and Gemini unfolded?

A: The partnership faced significant challenges, including Genesis suspending withdrawals in November 2022 and filing for bankruptcy in January 2023. Legal actions followed, with the SEC filing a complaint and Gemini suing Genesis. Genesis also reached an agreement with the New York Department of Financial Services, resulting in the loss of its New York BitLicense.

🔮 In Conclusion

While the settlement between Genesis Global Holdco and the NYAG seemed like a step towards resolution, the subsequent expanded complaint has complicated matters. The allegations of fraud and false assurances surrounding the Gemini Earn program paint a troubling picture. As this case unfolds, it will be crucial to see how the court evaluates the proposed settlements and the potential implications for the defendants involved.

Remember, staying informed and understanding the intricacies of the financial and blockchain industries is vital for being a savvy investor and consumer. Keep an eye on the developments in this case and other related news to make informed decisions within this ever-evolving landscape.

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