Letitia James announces payments for 29,000 New Yorkers

New York Attorney General Letitia James said Monday that she has reached a $2 billion settlement with cryptocurrency companies, a move that will help investors, including nearly 30,000 New Yorkers, recover losses from alleged fraud by the companies.

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The deal involved cryptocurrency companies Genesis Global Capital, Genesis Asia Pacific PTE and Genesis Global Holdco, which were the subject of a lawsuit from James' office that accused them of hiding more than $1 billion in losses from investors. Earlier this year, the case expanded to allege that Digital Currency Group and Genesis, along with their top executives, defrauded investors of $2 billion.

"When investors suffer losses due to fraud and manipulation, they deserve to be compensated," James said in a statement. "We see the real-world consequences and detrimental losses that can occur due to the lack of oversight and regulation within the cryptocurrency industry. New York investors deserve the peace of mind that comes from a properly regulated market."

The Prosecutor's Office said it will establish a Victims Fund that will be paid with Génesis' assets after the bankruptcy process the company is going through has reached an agreement with creditors.

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"If those creditors are not compensated based on the current values ​​of the digital assets, the Victims Fund will receive up to $2 billion of Genesis' remaining assets," James' office said in the statement. "The Victim Fund will then make distributions to compensate Genesis' creditors for the full and fair amounts of their actual losses until the Victim Fund is depleted."

The 29,000 affected New Yorkers had invested more than $1 billion in Genesis through the Gemini Earn investment vehicle, the AG said in the statement.

James' office described the settlement as the largest against a cryptocurrency company in New York. The agreement also strips Genesis of the right to operate in the state.

The deal is subject to bankruptcy court approval. Genesis has not accepted blame.

"Under this agreement, Genesis neither admits nor denies the allegations in this lawsuit, and the lawsuit will continue against the remaining defendants, as well as Genesis' former business partner, Gemini Trust Company, LLC," the attorney general's office said.

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In January 2023, Genesis, which operated as a cryptocurrency lender, filed for bankruptcy, as part of a move the company said was aimed at finding a "comprehensive resolution" for its customers.

"At this time, repayments and new loan originations in the lending business remain suspended, and claims will be addressed through the Chapter 11 process," the company said at the time.

On Friday, a judge approved the bankruptcy plan that will aim to return $3 billion to customers, Reuters reported.

When contacted for comment on Monday, a Genesis spokesperson shared a statement with news week and said the company would have no comment beyond this.

"Our goal throughout this process has been to maximize value for all creditors, and we are pleased that the court has approved both our Plan and the NYAG settlement agreement. We look forward to putting the Plan into effect and making distributions as quickly as possible. possible". Derar Islam, interim CEO of Genesis, said in the statement.

The company said in its statement that creditors will be compensated "in the form of the original assets they lent as much as possible, rather than being limited to the dollar value of the cryptocurrency assets as of the petition date and converting them into cash or other forms". that may not reflect the current or future value of the cryptocurrency assets."

Update 5/20/24, 3 pm ET: This article has been updated with comments from Genesis.