Feb 1, 2024 - Business

Bankrupt crypto lender Genesis reaches settlement agreement with SEC

Illustration of the SEC logo with a hand in front making a "shushing" hand motion.

Illustration: Aïda Amer/Axios

Genesis, the bankrupt crypto lending unit of Digital Currency Group, settled its civil suit with the Securities and Exchange Commission.

Why it matters: Amidst the crypto market reawakening, former major players and the regulatory agency appear eager to tie up loose ends.

State of play: Genesis filed a motion Wednesday asking the bankruptcy court to approve the agreement, with a hearing set for Feb. 14.

Details: Under terms of the settlement, the SEC will have a general unsecured claim against Genesis for $21 million, which would be subordinated to other priority and general unsecured claims and allowed administrative expenses.

Flashback: The SEC sued both Genesis and Gemini last January, alleging that the pair engaged in an unregistered securities offering with the contract underpinning the Gemini Earn program.

  • Genesis and the SEC started negotiating terms of the settlement in November, according to the court filing.

Between the lines: Part of the settlement requires Genesis to stay mum — it's not allowed to say that it did not violate federal securities laws as set out in the complaint; it's also not allowed to say or do anything that would suggest that the SEC's complaint "is without factual basis."

  • Of note: The SEC recently denied a petition to amend the so-called gag rule, which Commissioner Hester Peirce characterized as "unsettling" in a dissenting opinion.
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