Genesis Global Holdco, a bankrupt crypto lender owned by Digital Currency Group (DCG), has agreed to a settlement to end the United States Securities and Exchange Commission’s (SEC) Earn lawsuit.
Earlier last year, the SEC sued Genesis for violating securities law by offering and selling unregistered securities to retail investors through the Gemini Earn program. The lawsuit also targeted crypto exchange Gemini, Genesis’ partner in the program. The agency stated that both partners raised billions of dollars worth of cryptocurrencies from hundreds of thousands of investors through Gemini Earn.
$21M Settlement Deal
As part of a settlement, Genesis has now agreed to pay the SEC $21 million in penalties to end the lawsuit. However, this fine will be paid “if and only all general unsecured creditors of [Genesis] are made whole,” according to a filing in the U.S. Bankruptcy Court for the Southern District of New York.
“The Settlement Agreement is the product of extensive negotiations between the SEC and GGC. The proposed settlement will, among other benefits to the Debtors’ estates, resolve the Civil Action Claim filed by the SEC in these Chapter 11 Cases and eliminate the risks, expenses, and uncertainty associated with protracted litigation against the SEC,” said the filing.
According to the filing, Genesis debtors have proposed scheduling a hearing on February 14 to enter a motion recognizing the deal between itself and the SEC.
The Fall of Earn
Genesis suspended withdrawals from the Earn program in November 2022 due to FTX’s contagion. The suspension left around 232,000 Gemini customers unable to access their crypto assets worth $1 billion.
The situation was further exacerbated when Genesis filed for bankruptcy in January 2023, leading to a legal tussle and public feud between Gemini’s founders, Cameron and Tyler Winklevoss, and DCG’s CEO, Barry Silbert.
Genesis and Gemini partnered in December 2020 to allow the latter’s customers to lend their crypto assets to Genesis in return for interest payments.
