Genesis Global reaches a deal with the SEC, agreeing to a $21 million penalty amid ongoing bankruptcy proceedings and regulatory scrutiny.
The cryptocurrency sector has seen its fair share of legal battles, and the latest development involves Genesis Global Holdco, a subsidiary of Digital Currency Group. The company has reached a settlement agreement with the U.S. Securities and Exchange Commission (SEC) over a lawsuit concerning its Gemini Earn program. This settlement will see Genesis paying a $21 million penalty, marking a significant step in resolving the issues surrounding the program's legality.
Genesis Global Holdco found itself in hot water with the SEC over allegations of securities law violations. The program in question, Gemini Earn, was designed to offer interest payments on loaned digital assets. However, the SEC claimed that the way Genesis raised money from investors through this program was illegal. By agreeing to the $21 million settlement, Genesis aims to put these allegations to rest, although the company has denied any wrongdoing.
The settlement comes at a time when Genesis is navigating through Chapter 11 bankruptcy, which it filed for in January 2022. The payment of the civil penalty is contingent on the condition that Genesis fully repays its customers and other creditors. This means that the $21 million will only be paid after all other claims have been settled. The settlement is still pending approval from the bankruptcy court, but if accepted, it will help Genesis eliminate the risks and expenses associated with prolonged litigation.
For users of the Gemini Earn program, the settlement brings both relief and uncertainty. While the agreement between Genesis and the SEC is a step towards resolution, it also indicates that users may only receive about 61% of the crypto value they are owed due to the bankruptcy proceedings. This highlights the risks involved in the cryptocurrency lending space and the importance of regulatory compliance.
This settlement serves as a reminder of the regulatory complexities and risks inherent in the cryptocurrency industry. Companies operating in this space must navigate a landscape of evolving regulations and ensure that their programs comply with securities laws. For investors, it underscores the need for due diligence and the understanding that high returns often come with high risks.