Genesis Settles NYAG Fraud Lawsuit: Report – Unchained

Genesis has settled a lawsuit with the New York Attorney General, structuring the settlement to pay back Gemini Earn customers and other creditors with funds that would have otherwise gone to authorities.

Bankrupt crypto lender Genesis Global Capital has settled a lawsuit brought by the New York Attorney General (NYAG) Letitia James last year, claiming that the firm along with Gemini and Digital Currency Group (DCG) defrauded investors of over $1 billion. 

According to a Thursday report from Bloomberg, the settlement was structured in a way that would return assets to Gemini Earn customers and other Genesis creditors that may have otherwise been handed to state authorities. 

The deal must be approved by a bankruptcy judge and comes after Genesis settled a lawsuit with the U.S. Securities and Exchange Commission (SEC) for $21 million, in which the firm did not admit to any wrongdoing.

Meanwhile, Genesis’ parent company DCG has opposed the firm’s restructuring plan, calling it an impermissible “cramdown” that fails to align with legal standards for bankruptcy, purportedly allowing creditors to claim recoveries exceeding the values assessed at the filing date, among other infractions.

“This kind of naked seizure of equity holder rights in direct contravention of law and public policy is the very definition of bad faith,” said DCG lawyers in a document filed on Feb. 6.

DCG also claimed that the restructuring plan should not be accepted because it overpays creditors, saying the proposed payouts give customers more than they are entitled to. 

In court documents, lawyers for DCG said that the proposed plan pays unsecured creditors hundreds of millions of dollars more than the full amount of their petition date claims” and “disproportionately favors a small controlling group of creditors over others.

Last week, Unchained reported that Genesis was looking to sell $1.4 billion dollars-worth of shares in Grayscale Investments’ newly converted spot Bitcoin exchange traded fund – the Grayscale Bitcoin Trust (GBTC).