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By Omar Mohammed
Reporter, Economy & Finance
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New York Attorney General Letitia James said on Monday that she has reached a $2 billion settlement with cryptocurrency companies, a move that will assist investors, including nearly 30,000 New Yorkers, to recoup losses over alleged fraud by the businesses.
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The settlement involved cryptocurrency businesses Genesis Global Capital, Genesis Asia Pacific PTE and Genesis Global Holdco that were the subjects of a lawsuit from James' office that accused them of hiding more than a billion dollars in losses from investors. Earlier this year, the case widened to allege that Digital Currency Group and Genesis, along with their top executives, defrauded investors of $2 billion.
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"When investors suffer losses because of fraud and manipulation, they deserve to be made whole," James said in a statement. "We see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry. New York investors deserve the peace of mind that comes from a properly regulated marketplace."
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The AG's office said that it will establish a Victims' Fund that will get be paid from Genesis' assets after a bankruptcy process the company is going through has settled terms with creditors.
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"If those creditors are not made whole based on today's digital asset values, the Victims' Fund will receive up to $2 billion from Genesis' remaining assets," James' office said in the statement. "The Victims' Fund will then make distributions to compensate Genesis' creditors for the full and fair amounts of their actual losses until the Victims' Fund is depleted."
The 29,000 New Yorkers affected had invested more than $1 billion in Genesis through the Gemini Earn investment vehicle, the AG said in the statement.
James' office described the settlement as the largest against a cryptocurrency firm in New York. The agreement also strips Genesis of the right to operate in the state.
The settlement is contingent upon approval from the bankruptcy court. Genesis has not accepted guilt.
"Under this settlement, Genesis neither admits nor denies the allegations of this lawsuit, and the suit will continue against the remaining defendants, as well as Genesis' former business partner, Gemini Trust Company, LLC," the AG's office said.
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In January 2023, Genesis, which operated as a crypto lender, filed for bankruptcy, part of a move the company said was geared to find "global resolution" for its clients.
"At this time, redemptions and new loan originations in the lending business remain suspended, and claims will be addressed through the Chapter 11 process," the company said at the time.
On Friday, a judge approved the bankruptcy plan that will aim to give back $3 billion to customers, Reuters reported.
Reached for comment on Monday, a Genesis spokesperson shared a statement with Newsweek and said the company would not comment beyond it.
"Our goal throughout this process has been to maximize value for all creditors, and we are gratified that the court approved both our Plan and the NYAG settlement agreement. We look forward to putting the Plan into effect and making distributions as expeditiously as possible," Derar Islim, interim CEO of Genesis, said in the statement.
The company said in its statement that creditors will compensated "in the form of the original assets they loaned as much as possible, rather than being limited to the USD value of the cryptocurrency assets as of the petition date and converting these into cash or other forms of repayment that might not reflect the current or future value of the cryptocurrency assets."
Update 5/20/24, 3 p.m. ET: This article has been updated with comment from Genesis.
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