Genesis’s $21 Million Settlement With SEC Green Lit by Judge

A federal judge signed off on bankrupt crypto firm Genesis Global Capital’s settlement with the Securities and Exchange Commission over allegations a digital-asset lending program it helped run violated the agency’s rules.

Genesis will pay $21 million under the terms of the agreement approved by the judge on Monday. The SEC sued Genesis and Gemini Trust Co. in January 2023, alleging that the companies illegally raised billions of dollars’ worth of cryptoassets from investors through the so-called Gemini Earn program.

The program, which was launched in February 2021, allowed Gemini customers to collect as much as 8% in interest on their digital-asset holdings by loaning them to Genesis. The SEC has said the arrangement violated securities laws.

Genesis agreed to the settlement without admitting or denying the SEC’s allegations. The SEC said it won’t receive any portion of the $21 million penalty until after all other bankruptcy claims are paid out, including claims by retail investors.

A representative for Genesis didn’t immediately respond to a request for comment.

The “settlement builds on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws,” Securities and Exchange Commission Chair Gary Gensler said Tuesday in a statement.

Gemini Trust Co., the crypto exchange founded by billionaires Cameron and Tyler Winklevoss, agreed in February to return at least $1.1 billion to customers through the Genesis bankruptcy as part of a separate settlement with the New York Department of Financial Services.

The Earn program was successful for both Genesis and Gemini until Three Arrows Capital, a crypto investment fund, failed in the middle of 2022 — leaving a hole in Genesis’s balance sheet. FTX’s collapse in November sent more shock waves through the industry. Genesis froze withdrawals in late 2022 after facing a spike in requests, and ultimately filed for bankruptcy.

Top photo: The Genesis logo on a laptop computer arranged in the Brooklyn borough of New York, US, on Thursday, Nov. 17, 2022. Reverberations from the collapse of Sam Bankman-Fried’s empire continue to spread through financial markets, threatening the future of crypto lenders like BlockFi Inc. and Voyager Digital Ltd. Photographer: Gabby Jones/Bloomberg.