What it was
Genesis Global Capital, LLC was the lending business inside Digital Currency Group. It borrowed bitcoin and other crypto assets and lent them on, mostly to large institutional and accredited counterparties. That is an ordinary enough activity, and for a while Genesis was the largest desk doing it.
Retail money reached Genesis through a partnership. In December 2020 Genesis agreed with Gemini to offer Gemini's customers the chance to lend their assets to Genesis for interest. The programme, Gemini Earn, opened in February 2021, with Gemini acting as agent and deducting a fee of up to 4.29 per cent from the interest Genesis paid. The SEC's complaint sets out the structure: Genesis was the issuer, and it decided how the assets were used.
What happened
In November 2022 Genesis announced that it would not let Gemini Earn investors withdraw, saying withdrawal requests exceeded its liquidity. The SEC records that Genesis was then holding roughly $900 million of assets belonging to about 340,000 Earn investors, most of them in the United States. Genesis and two affiliates filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the Southern District of New York on 19 January 2023.
What regulators established
On 12 January 2023 the SEC sued Genesis and Gemini in the Southern District of New York for the unregistered offer and sale of securities through Gemini Earn, under Sections 5(a) and 5(c) of the Securities Act of 1933. On 19 March 2024 the SEC announced that Genesis had consented to a final judgment with a $21 million civil penalty and a permanent injunction, with the penalty subordinated to other allowed claims including those of Earn investors. Genesis neither admitted nor denied the allegations.
The New York Attorney General sued Genesis in October 2023 and announced a settlement worth $2 billion on 20 May 2024, creating a victims' fund and banning Genesis from operating in New York. That settlement also records that Genesis neither admits nor denies the allegations, which is why this entry carries no adjudicated fraud tag. The Attorney General's case against other defendants continued. Listing here is not endorsement.