Genesis looks to expedite bankruptcy payouts due to NYAG suit
Bankrupt crypto lender Genesis Global Capital (GGC) is facing a complex legal conundrum as it grapples with a civil fraud lawsuit brought forth by New York Attorney General Letitia James.
The lawsuit, which also involves Genesis’s parent company, Digital Currency Group (DCG), and former partner Gemini Trust, alleges fraudulent activities that resulted in investor losses exceeding $1 billion through the Gemini Earn program.
In response to this legal challenge, Genesis Global is considering a “no deal” bankruptcy plan. Instead of waiting for the outcome of the lawsuit, the company intends to propose a bankruptcy plan that would distribute available crypto assets to its customers while establishing a process to preserve litigation claims against DCG and other parties.
Genesis Global believes that such a bankruptcy plan, coupled with a settlement with DCG, would be in the best interest of its creditors. However, the company is under time pressure to finalize this plan and present it for creditor approval.
In the meantime, DCG is reportedly open to engage in settlement talks to secure a more favorable outcome for Genesis Global’s creditors. However, if compelled to do so, DCG is fully prepared to defend itself in litigation against Genesis’s claims.
Earlier this month, the New York Attorney General (NYAG), Letitia James, leveled allegations against Gemini Trust, Genesis Global Capital, and Digital Currency Group (DCG). The lawsuit accuses the trio of duping investors, resulting in losses amounting to over $1 billion.
Not stopping at the companies, the lawsuit has further implicated notable figures from the crypto world. Genesis’s ex-CEO, Soichiro “Michael” Moro, and Barry Silbert, the CEO and founder of DCG, have been accused of clandestinely incurring $1.1 billion in losses, thereby “defrauding investors and the public.”
Per the official statement, the deceptive practices of these firms have impacted around 230,000 investors. Gemini has come under fire for allegedly misrepresenting its investment scheme, ‘Gemini Earn’, painting it as a “low-risk investment,” contrary to its true nature.
Meanwhile, the statement recalls an event from June 2022 when the bankrupt hedge fund Three Arrows Capital failed to repay loans amounting to billions of dollars. Simultaneously, another setback for Genesis was a $100 million loss from Babel Finance, thereby escalating its total losses beyond $1.1 billion.
The lawsuit further alleges deceptive conduct by Genesis, its former CEO Moro, DCG, and its CEO Silbert. Their purported deceit resulted in massive financial losses for numerous investors, with some even losing their entire life savings. Given the magnitude of the allegations, the NYAG’s aims not only to ensure restitution for the victims but also to bar Gemini, Genesis, and DCG from any investment business in New York, while also seeking the disgorgement of their ill-gotten wealth.