Genesis Global Trading, a company involved in cryptocurrency trading, has resolved a case with the New York Department of Financial Services (NYDFS). As part of the settlement, the company has agreed to pay a penalty of $8 million and has also surrendered

Genesis Global Trading Agrees to Pay $8 Million Penalty to NYDFS for Settling Allegations of Compliance Failures

Hassan Shittu Last updated: January 13, 2024 07:08 EST | 3 min read

Genesis Global Source: AdobeStock / Timon

Genesis Global Trading, a subsidiary of Digital Currency Group, has agreed to pay an $8 million penalty to the New York State Department of Financial Services (NYDFS) after settling allegations of compliance failures. The NYDFS accused the company of violating virtual currency and cybersecurity regulations, leading to its vulnerability to illicit activities and cybersecurity threats.

The settlement, announced on Friday, mandates Genesis Global Trading to cease its operations in the state of New York and surrender its BitLicense, which is required for engaging in virtual currency activities in the state.

• 1inch DAO Partners with Legal Firm STORM Partners to Enhance Governance and Compliance
• The Impact of XRP Burns on Token Value: Ripple’s CTO Weighs In 💥💰🔥
• Big Updates, Big Things In Store: Cardano Soars with Bullish Momentum 🚀

NYDFS Superintendent Adrienne A. Harris expressed concern over the company’s failure to maintain a functional compliance program, stating that it demonstrated a disregard for regulatory requirements and exposed both the company and its customers to potential threats.

Following routine examinations and an enforcement investigation, NYDFS found that Genesis Global Trading fell short of the required standards in various areas, including Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance, transaction monitoring, Suspicious Activity Report (SAR) filings, Office of Foreign Assets Control (OFAC) screening, and cybersecurity.

The regulator specifically criticized the company’s cybersecurity risk assessment, stating that it was not sufficiently comprehensive and lacked the identification of areas requiring improvement.

NYDFS’s virtual currency and cybersecurity regulations are considered stringent standards designed to protect consumers and institutions from potential threats. Genesis Global Trading’s failure to maintain a functional compliance program demonstrated a disregard for these regulatory requirements. The $8 million penalty adds to the growing list of penalties imposed by NYDFS on virtual currency companies, amounting to more than $140 million to date.

NYDFS Superintendent Adrienne A. Harris Advances Prudential Regulation of Virtual Currency

The New York State Department of Financial Services (DFS) remains at the forefront of prudential regulation of virtual currency.

Superintendent Adrienne A. Harris has been instrumental in advancing regulatory frameworks not only at the state level but also by collaborating with regulators globally, including in Illinois, California, the United Kingdom, the European Union, the United Arab Emirates, and Singapore.

DFS aims to share its expertise and experience to contribute to the development of effective regulatory standards worldwide.

Under Superintendent Harris’s VOLT initiative, the DFS has expanded its team by adding more than 60 experts, reinforcing licensing oversight and supervision. The experts specialize in various areas, including Bank Secrecy Act/Anti-Money Laundering laws, accounting oversight, financial crimes, data governance, cybersecurity, and more.

The DFS has also strengthened its policies, established new procedures, and gained new assessment authority to support the growing virtual currency unit.

To address emerging issues, DFS has issued eight pieces of innovative industry regulatory guidance, including criteria for USD-backed stablecoins, customer protection during virtual currency insolvency, and guidance on using blockchain analytics tools.

Under Superintendent Harris’s leadership, DFS has taken supervisory and enforcement actions against cryptocurrency companies, including being the first regulator globally to address Binance and negotiating one of the largest virtual currency settlements with Coinbase, Inc.

The New York Attorney General’s Lawsuit Against Genesis Global Trading Sees a Settlement

The agreement comes in the midst of an ongoing lawsuit filed by the New York Attorney General’s Office in October. The lawsuit accuses Genesis Global, alongside its parent companies, Digital Currency Group (DCG) and Gemini Trust, of defrauding investors by concealing over $1 billion in losses.

Genesis Global Trading has encountered legal challenges throughout the past year. In January, the Securities Exchange Commission (SEC) charged the company with selling billions of dollars worth of unregistered securities to hundreds of thousands of investors.

Following the SEC charges, Genesis declared bankruptcy and is currently engaged in court proceedings to recover lost investor funds.

However, DCG is reportedly planning to file a motion to dismiss a lawsuit with the New York Attorney General’s office.

Analysis: Compliance is Key in the Cryptocurrency Industry

The recent settlement between Genesis Global Trading and NYDFS highlights the importance of compliance in the cryptocurrency industry. With regulatory bodies becoming increasingly vigilant, companies must ensure that they have robust compliance programs in place to meet the stringent standards set by these regulators.

The $8 million penalty imposed on Genesis Global Trading is not only a financial blow to the company but also serves as a wake-up call for other virtual currency companies. It underscores the need for comprehensive compliance measures that cover areas such as AML, transaction monitoring, and cybersecurity.

Superintendent Adrienne A. Harris’s leadership at NYDFS is commendable in spearheading prudential regulation of virtual currency. By collaborating with regulators worldwide and expanding the DFS team with experts in various domains, she is paving the way for effective regulatory standards in the industry.

The ongoing lawsuit filed by the New York Attorney General’s Office against Genesis Global Trading further highlights the legal risks that companies in the cryptocurrency space may face. With investor protection and transparency being paramount, it is crucial for companies to operate with integrity and disclose accurate financial information.

As the cryptocurrency industry continues to evolve, compliance will remain a critical factor in its growth and acceptance. Companies must stay updated on regulatory requirements and proactively implement robust compliance programs to ensure their long-term success.

Q&A: Additional Insights on Compliance and Future Outlook

Q: What are the potential consequences for companies that fail to comply with cryptocurrency regulations?

A: Companies that fail to comply with cryptocurrency regulations may face hefty penalties, like the $8 million penalty imposed on Genesis Global Trading. Apart from financial consequences, non-compliance can lead to reputational damage and loss of trust from investors and customers. Furthermore, regulatory bodies may impose additional restrictions or even suspend operations until compliance is achieved.

Q: How can virtual currency companies strengthen their compliance programs?

A: Virtual currency companies can strengthen their compliance programs by investing in robust AML and transaction monitoring systems, improving cybersecurity measures, conducting regular audits, and staying updated on regulatory changes. It is essential to allocate dedicated resources and personnel to compliance functions and to establish a culture of compliance within the organization.

Q: What are the trends and future outlook for cryptocurrency compliance?

A: The trend in cryptocurrency compliance is towards stricter regulations and increased enforcement actions. Regulatory bodies around the world are taking a proactive approach to ensure the integrity of the cryptocurrency market. Companies can expect more comprehensive regulatory frameworks, increased scrutiny on AML and cybersecurity compliance, and collaborations between regulators globally. Staying ahead of regulatory developments and implementing best compliance practices will be crucial for companies to thrive in this evolving landscape.

---

References: 1. Genesis Global Trading Settles Allegations of Compliance Failures 2. NYDFS Imposes $8 Million Penalty on Genesis Global Trading 3. DFS Advances Prudential Regulation of Virtual Currency 4. The Ongoing Lawsuit Against Genesis Global Trading 5. Understanding Cryptocurrency Compliance

---

Interact with us and share your thoughts on social media! 😄✌️

We will continue to update Blocking; if you have any questions or suggestions, please contact us!