Why Genesis Global Trading Will Pay $8 Million Penalty

Genesis Global Trading, a prominent cryptocurrency firm, has settled with the New York Department of Financial Services (NYDFS).

As part of the agreement, Genesis Global Trading will relinquish its authorization to carry out operations within the state.

Genesis Global Trading to Pay $8 Million Fine

In a January 12 statement, Genesis consented to pay the New York financial regulator an $8 million fine. The firm also agreed to discontinue its operations in the state and voluntarily surrender its BitLicense.

The BitLicense is a prestigious regulatory approval authorizing cryptocurrency enterprises to conduct operations within New York. The license requires strict adherence to robust compliance with know-your-customer (KYC) protocols, anti-money laundering (AML) measures, and prescribed capitalization requirements.

Per the statement, the settlement comes in the wake of a thorough investigation by New York authorities that revealed substantial shortcomings in the firm’s anti-money laundering and cybersecurity programs.

Read more: Top 12 Crypto Companies to Watch in 2024

Superintendent Adrienne Harris emphasized the significance of adherence to regulatory requirements. The regulatory chief highlighted the serious implications of failing to maintain a functional compliance framework.

“Genesis Global Trading’s failure to maintain a functional compliance program demonstrated a disregard for the Department’s regulatory requirements and exposed the company and its customers to potential threats,” Harris added.

Meanwhile, NYDFS clarified that this settlement pertained specifically to Genesis Global Trading, distinct from Genesis Global Capital, the cryptocurrency lender that filed for bankruptcy last year. Prominent crypto investment firm Digital Currency Group (DCG) owns the two companies.

Separately, New York’s Attorney General initiated legal action against Genesis Global Capital, Gemini, and Digital Currency Group last October. The lawsuit alleges fraudulent activities within the Gemini Earn program, accusing them of deceiving investors.

Crypto Lender Genesis Bankruptcy in Progress

Genesis’s bankruptcy process continues, with a recent filing suggesting that Digital Currency Group has yet to fulfill its loan obligations to the lender.

A group of lenders accused the parent company of failing to meet its loan repayment obligations despite its public claim.

“DCG is pleased to announce that we have completed a payoff of all short-term loans from Genesis. In total, DCG has paid off more than $1 billion of debt to its creditors in just over a year, including nearly $700 million to Genesis, satisfying all obligations currently due. With this milestone behind us, we’re looking forward to the next chapter of DCG and the future growth of our industry. And as always, we will continue to honor our financial commitments,” Digital Currency Group claimed.

However, the lenders said DCG only provided $189 million in cash, supplementing the remainder through the transfer of illiquid assets like its holdings in Grayscale Ethereum Classic Trust (ETCG) and Grayscale Ethereum Trust (ETHE). These transfers were purportedly intended to satisfy DCG’s Bitcoin obligations to Genesis.

The group argued that DCG is limited to honoring its USD and BTC commitments exclusively through these currencies, with no inclusion of other assets.

As a result, DCG’s outstanding BTC obligations are contingent upon Genesis liquidating the ETCG and ETHE shares to secure BTC. The resolution of these shares will determine the fulfillment of DCG’s BTC commitments.