Crypto lender Genesis has agreed to a $2 billion settlement to repay defrauded investors following its Chapter 11 bankruptcy filing in January 2023.
The collapse of FTX, a significant player in the cryptocurrency industry, triggered the bankruptcy.
Genesis Agrees to $2B Settlement
New York Attorney General Letitia James announced the settlement on Monday, highlighting its significance in providing justice to victims. The lawsuit alleged they misled investors about the Gemini Earn program. It claimed over $1 billion in losses, later expanded to allege an additional $2 billion in fraud.
Despite a legal challenge from DCG, the bankruptcy court approved Genesis’s Chapter 11 repayment plan, including the settlement with James’s office. The settlement, the largest ever against a crypto firm in New York, includes the creation of a victims fund to aid the 29,000 New Yorkers affected, who invested through Gemini Earn to get returns of up to 7.4% APY. Genesis is also banned from operating in New York.
Read more: Top Crypto Bankruptcies: What You Need To Know
“Once again, we see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry. New York investors deserve the peace of mind that comes from a properly regulated marketplace, and that is something my office will always act to achieve,” added Attorney General James.
The bankrupt lender neither admits nor denies the allegations in the lawsuit, which will continue against the other defendants, including Gemini, according to the New York Attorney General’s statement.
Refunds to Start in May
According to announcement, investors will start receiving refunds as early as May. The court-approved repayment plan includes a multi-phase process to allocate resources to creditors. Dollar creditors will be refunded 100% of their value first, while crypto creditors will receive the remaining assets. This structure ensures that dollar-denominated debts are prioritized over crypto-denominated ones.
Read more: Digital Currency Group Downfall: What Went Wrong With the VC Giant
“Our goal throughout this process has been to maximize value for all creditors, and we are gratified that the court approved both our [bankruptcy plan] and the NYAG settlement agreement,” said Genesis interim CEO Derar Islim.
Following the verdict, Gemini issued a statement expressing gratitude to the judge and clarifying that the ruling does not affect the overall agreement between Gemini, Genesis, and other creditors.
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