The New York Attorney General (NYAG) achieved a significant legal triumph as the court approved a settlement with Genesis, designed to compensate New Yorkers who invested over $1.1 billion in the Genesis through the Gemini Earn program. The settlement also includes a prohibition on Genesis from conducting business in New York State, marking a decisive action in response to allegations of financial misconduct and investor fraud.

In October 2023, the NYAG filed a lawsuit against Genesis, Gemini, and Digital Currency Group (DCG), alleging that they defrauded over $1 billion from more than 230,000 investors, including 29,000 individuals from New York. The lawsuit contended that Gemini was aware of Genesis' undersecured loans and excessive concentration with Alameda Research but failed to disclose this critical information to investors, leading to substantial financial losses and harm to unsuspecting participants.

Attorney General Letitia James emphasized the significance of the settlement, stating, "This landmark agreement represents a significant step towards providing justice to the victims who invested in Genesis. It underscores the real-world consequences of inadequate oversight and regulation in the cryptocurrency industry, highlighting the need for enhanced protections and accountability in the digital asset space."

As part of the settlement, Genesis did not admit to any wrongdoing but agreed to cease operations in New York as a measure to address the allegations and concerns raised by the NYAG. Digital Currency Group (DCG), initially named in the NYAG's lawsuit, was not included in the settlement but had previously raised objections to the settlement process, citing concerns about the distribution of value to preferred creditors and potential violations of U.S. bankruptcy laws.

Recently, Genesis unveiled a bankruptcy liquidation plan that received court approval, outlining the return of approximately $3 billion worth of customer assets, representing around 77% of the total value of customer claims. The Victims' Fund, established as part of the settlement, is set to receive up to $2 billion from Genesis' remaining assets after the initial bankruptcy distributions, aiming to compensate creditors for their outstanding losses and provide restitution to affected individuals.

This settlement represents a significant milestone in the regulation and oversight of the cryptocurrency industry, serving as a precedent for future cases involving financial impropriety and investor protection within the sector. It underscores the importance of accountability, transparency, and regulatory enforcement in safeguarding investors and maintaining integrity in the digital asset space.