Genesis Global and its affiliates have reached a settlement with the U.S. Securities and Exchange Commission (SEC), agreeing to pay a $21 million civil penalty to resolve a lawsuit regarding the “unregistered offer and sale of securities” through the Gemini Earn program. The settlement, proposed in a filing on January 31 in the U.S. Bankruptcy Court for the Southern District of New York, stems from negotiations between Genesis Global Holdco (GGC) and the SEC.
The settlement offers various benefits to GGC’s estates, including resolving the SEC’s Civil Action Claim filed in these Chapter 11 Cases. By opting for this settlement, Genesis seeks to eliminate the risks, expenses, and uncertainties associated with prolonged litigation against the SEC.
The SEC initiated the lawsuit against Genesis and Gemini in January 2023, focusing on the period between February 2021 and November 2022, alleging violations of U.S. securities laws through their crypto lending program. Consequently, Genesis suspended withdrawals on its platform in November 2022 and filed for bankruptcy in January 2023.
This settlement announcement follows a series of legal actions involving Gemini, Genesis, Digital Currency Group (Genesis’ parent company), and its CEO Barry Silbert. Additionally, Genesis Global Trading, a separate entity from Genesis Global Capital and unrelated to the Gemini Earn program, agreed to pay an $8 million penalty to the New York Department of Financial Services on January 12. This settlement arose from an investigation revealing significant shortcomings in the company’s Anti-Money Laundering and cybersecurity programs, leading to the cessation of operations in New York and surrendering its BitLicense.
In a broader context, the SEC has filed numerous lawsuits against crypto firms over the past year, with SEC Chair Gary Gensler consistently advocating for classifying most cryptocurrencies as securities. Notable cases include a civil suit against Sam Bankman-Fried, co-founder of FTX, and lawsuits against major crypto entities like Binance, its CEO Changpeng Zhao, and Coinbase, all of which have denied any wrongdoing and sought the dismissal of the regulator’s cases.
However, the SEC faced setbacks, notably withdrawing its lawsuit against crypto startup DEBT Box after admitting to inaccurate statements in court. This acknowledgment followed criticism from Judge Shelby regarding the agency’s lawyers and their “false or misleading” statements, alleging DEBT Box’s attempt to move assets offshore to evade regulatory oversight.
