- Genesis Global and its affiliated entities reached a settlement with the SEC, agreeing to pay a civil penalty of $21 million
- The settlement resolves the SEC’s civil lawsuit over the unregistered offer and sale of securities through the Gemini Earn program
- Genesis would eliminate the risks, expenses, and uncertainty associated with protracted litigation against the SEC as a result of the settlement
- Genesis suspended withdrawals on its platform in November 2022 and subsequently filed for bankruptcy in January 2023
- Genesis Global Trading agreed to pay an $8 million penalty to the New York Department of Financial Services and cease operations in New York
- The SEC has filed numerous lawsuits against crypto firms and individuals in the past year, with most cryptocurrencies classified as securities
- The SEC was recently forced to withdraw its lawsuit against crypto startup DEBT Box after admitting to making inaccurate statements in court
1. Summary of Settlement
Genesis Global and its affiliated entities have agreed to pay a civil penalty of $21 million to settle a lawsuit with the SEC over the “unregistered offer and sale of securities” through the Gemini Earn program. The settlement was proposed in a filing on January 31, in the U.S. Bankruptcy Court for the Southern District of New York. The settlement aims to resolve the SEC’s claims and eliminate the risks and uncertainties associated with protracted litigation.
2. Details of the Settlement
The settlement will provide several benefits to Genesis Global Holdco’s estates, including the resolution of the SEC’s Civil Action Claim filed in these Chapter 11 Cases. The SEC had filed a lawsuit against Genesis and Gemini in January 2023, alleging violations of U.S. securities laws through their crypto lending program. As a consequence of the legal proceedings, Genesis suspended withdrawals on its platform in November 2022 and subsequently filed for bankruptcy in January 2023.
3. Other Legal Actions
In addition to the settlement with the SEC, Genesis Global Trading, a distinct entity from Genesis Global Capital, agreed to pay an $8 million penalty to the New York Department of Financial Services. This settlement followed an investigation that uncovered “significant failings” in the company’s Anti-Money Laundering and cybersecurity programs. The SEC has also announced a $24 million settlement in its case against Bittrex and its former CEO William Shihara for operating an unregistered exchange.
4. Recent SEC Actions Against Crypto Firms
Over the past year, the SEC has filed numerous lawsuits against crypto firms, with a focus on the classification of most cryptocurrencies as securities. The agency initiated a civil case against Sam Bankman-Fried, co-founder of FTX, and filed lawsuits against major crypto players, including Binance, its CEO Changpeng Zhao, and Coinbase. However, the SEC was forced to withdraw its lawsuit against crypto startup DEBT Box after admitting to making inaccurate statements in court, leading to criticism from the presiding judge.
5. Impact and Implications
The settlement with the SEC represents a significant development in the regulatory landscape for crypto firms. It highlights the ongoing legal scrutiny and enforcement actions by regulatory authorities against companies operating in the cryptocurrency space. The outcome of these legal proceedings and settlements may have broader implications for the future regulation and compliance requirements for crypto companies and their operations.
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