Collapsed Genesis Agrees to Settle SEC’s Earn Lawsuit for $21M

Failed crypto lender Genesis has agreed to pay $21 million to settle a 2023 federal lawsuit alleging that the crypto company flogged unregistered securities. 

A Wednesday filing in the U.S. Bankruptcy Court in the Southern District of New York shows that Genesis will pay the cash to settle with the Securities and Exchange Commission (SEC).

In January of last year, the SEC hit Genesis with a lawsuit, alleging that the company allegedly raised billions of dollars worth of crypto from hundreds of thousands of investors in an unregistered securities offering. 

“The SEC’s complaint in the civil action alleges that, between February 2021 and November 2022, GGC and Gemini Trust Company, LLC engaged in an unregistered offer and sale of securities to U.S. retail investors as part of an investment opportunity called the Gemini Earn program,” Wednesday’s filing said. 

It added that the settlement “provides that the SEC shall receive an allowed general unsecured claim against GGC in the amount of $21 million.” Genesis will pay the cash to the SEC if creditors who previously used the service are repaid. 

Genesis, a subsidiary of Digital Currency Group (DCG), was one of many crypto companies hit hard by the collapse of FTX. It filed for bankruptcy shortly after the SEC’s lawsuit, revealing exposure to collapsed crypto venture fund Three Arrows Capital. 

Genesis worked by being a primary partner to Gemini for its Earn program, which allowed users to earn up to 8% interest on their crypto. But it ran into troubles following the collapse of crypto megabrand FTX and eventually froze customer withdrawals. 

Creditors have been waiting for their money since. DCG has said creditors will be made whole.

Edited by Ryan Ozawa.