Genesis Global, a Digital Currency Group (DCG) subsidiary, has reached a settlement agreement with the US Securities and Exchange Commission (SEC) to end a civil lawsuit.
The regulator accused the bankrupt crypto lender of violating securities rules through its now-terminated Gemini Earn program. Genesis has agreed to pay a $21 million civil penalty as part of the settlement, depending on the company’s ability to fully repay its customers and creditors under Chapter 11 bankruptcy proceedings.
SEC Allegations Resolved
The SEC’s complaint alleged that between February 2021 and November 2022, Genesis Global and Gemini Trust Company engaged in an unregistered offer and sale of securities to US retail investors through the Gemini Earn program.
The lawsuit claimed this violated Sections 5(a) and 5(c) of the Securities Act 1933. In response to the lawsuit, Genesis had previously sought to dismiss the case, but now the parties have agreed in extensive negotiations.
According to court documents filed in the New York bankruptcy court, the settlement agreement stipulates that the SEC will receive an allowed general unsecured claim of $21 million against Genesis Global, referred to as the “Allowed SEC Claim.”
This claim will be considered complete satisfaction of the civil action claim brought by the SEC. It is important to note that the Allowed SEC Claim will be subordinate to other allowed administrative expenses, secured, priority, and general unsecured claims.
Genesis Global’s Chapter 11 Moves Forward
According to the documents, the proposed agreement benefits the Debtors’ estates and aims to eliminate the risks, expenses, and uncertainties associated with protracted litigation against the SEC.
The settlement agreement will become effective upon the entry of the Final Judgment by the District Court, following approval from the bankruptcy court.
Suppose the Bankruptcy Court does not approve the Settlement Agreement before issuing a non-appealable discharge order. In that case, the SEC can petition the District Court for an order fixing the amount of disgorgement, pre-judgment interest, and/or civil penalty.
Genesis Global’s $21 million settlement with the SEC significantly develops the legal battle over the Gemini Earn program.
The agreement represents a resolution reached through extensive negotiations between the parties and provides a path forward for Genesis as it navigates the Chapter 11 bankruptcy proceedings.
The settlement, subject to court approval, aims to close the SEC’s civil action and create a framework for resolving the outstanding claims.
Featured image from Shutterstock, chart from TradingView.com