Bankrupt lender Genesis settles with SEC

Bankrupt lender Genesis and the Securities and Exchange Commission reached a settlement on the Earn lawsuit filed by the SEC last year. 

In a filing with a bankruptcy court, the SEC disclosed that Genesis could pay $21 million as part of the settlement agreement, the amount depends on creditor repayment. 

The claim “shall be subordinated to all other allowed administrative expenses, secured, priority, and general unsecured claims, as set forth in more detail in the Settlement Agreement.”

This most recent filing from Genesis seeks to approve its settlement with the regulatory agency.

According to the filing, the settlement seeks to “eliminate the risks, expenses and uncertainty associated with protracted litigation against the SEC.” The special committee, as well as the legal and financial advisers for Genesis, signed off on the settlement.

A hearing on the proposal will potentially take place later this month. 

The SEC filed its suit against Genesis last January, accusing the lender of pooling assets from Gemini Earn — which Genesis and Gemini partnered on — with funds from other customers. 

The two separate companies — Gemini and Genesis — were accused of violating federal financial law. The SEC also accused them of selling and offering unregistered securities. 

“Through this unregistered offering, Genesis and Gemini raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors. Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing,” the SEC alleged at the time.

According to the complaint, Genesis announced in November 2022 that it would not allow Gemini Earn users to withdraw crypto assets, as it didn’t have enough liquid assets to meet demand after that month’s collapse of FTX and ongoing market volatility. 

Earlier this month, Genesis Global Trading agreed to pay an $8 million penalty to New York and surrendered its BitLicense. Genesis Global Trading was an affiliate of Digital Currency Group and shuttered operations in September . The entity was not involved with the Earn program.

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