Genesis reaches $21 million SEC settlement in bankruptcy wind-down

Dietrich Knauth
·2 min read
Bitcoins created by Mike Caldwell are seen in this photo illustration at his office in Sandy, Utah

By Dietrich Knauth

NEW YORK (Reuters) - Crypto lender Genesis Global has settled a U.S. Securities and Exchange Commission lawsuit over its defunct Gemini Earn lending program, agreeing to a $21 million fine that will be paid only if Genesis is able to fully repay customers in its bankruptcy.

The deal will help Genesis avoid the costs and risks of defending itself from an SEC lawsuit that had accused the company of illegally selling securities. The settlement will allow Genesis to focus on repaying customers and other creditors, according to documents filed in U.S. Bankruptcy Court in Manhattan on Wednesday evening.

Genesis did not admit or deny wrongdoing in the settlement agreement.

The SEC sued Genesis the week before it filed for bankruptcy protection in January 2023, claiming that Genesis and cryptocurrency exchange Gemini Trust illegally sold securities to hundreds of thousands of investors through their jointly-managed crypto lending program, Gemini Earn.

The two companies partnered in December 2020 to allow Gemini customers the chance to loan their crypto assets to Genesis in exchange for earning interest, ultimately collecting billions of dollars' worth of crypto assets from investors.

The Earn program was halted during a crypto market crash in November 2023, and its failure has spurred litigation between Genesis, Gemini, and Genesis's parent company, Digital Currency Group. Gemini, run by the Winklevoss twins best known for their legal battle against Meta Platforms' CEO Mark Zuckerberg, had previously sued DCG over the failure of the companies' crypto lending partnership.

In addition to the SEC lawsuit, the three companies face a similar enforcement action by New York Attorney General Letitia James, who seeks to bar all three cryptocurrency firms from the financial investment industry in New York.

Genesis is moving ahead with a liquidation plan that aims to repay customers in cash or cryptocurrency, depending on the types of currency they had deposited in the Earn program. It is expected to seek court approval of its bankruptcy plan on February 14.

(Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and Diane Craft)