The New York Department of Financial Services (DFS) is preparing to announce a settlement with Genesis Global, a subsidiary of the Digital Currency Group (DCG), according to a recent report by Fortune Magazine. DFS Superintendent Adrienne Harris has voiced concerns over Genesis’ failure to maintain a functional compliance program, which she believes shows a disregard for regulatory requirements and puts the company and its customers at risk.
Prior to the bear market in late 2021, Genesis’ lending practice was linked to failed firms such as Three Arrows Capital and Alameda Research, leading to its bankruptcy in early 2023. Genesis was subsequently sued by the Securities and Exchange Commission (SEC) and the New York Attorney General’s office for allegedly offering unregistered securities. Although Genesis was not directly implicated in the bankruptcy or lawsuits, it experienced setbacks due to the broader struggles of its parent company. Consequently, the firm announced the closure of its over-the-counter trading platform in the United States in September 2023.
DFS conducted two examinations of the now-bankrupt crypto lending company. The first examination, which took place from May 2018 to March 2019, revealed deficiencies in the firm’s anti-money laundering and cybersecurity programs. Despite significant business growth, Genesis made little effort to address these deficiencies, leading DFS to initiate an enforcement investigation. This investigation found that the company had violated virtual currency and cybersecurity regulations.
In the second examination, DFS found that the suspicious activity reports (SARs) filed by Genesis did not meet regulatory standards. Moreover, no SARs were relayed to the company’s board of directors until the summer of 2022.
The DFS report also found that Genesis failed to conduct enhanced screening of employees and third-party service providers, as required by the Treasury Department. The company’s cybersecurity practices were also found to be insufficient, including a failure to annually review and approve practices and inadequate protection of sensitive data and nonpublic personal information. As part of the settlement, Genesis has agreed to pay an $8 million fine. The relatively low amount is said to reflect Genesis’s cooperation during the investigation and its efforts to update its programs. However, Genesis has also agreed to cease all operations in New York and surrender its BitLicense.
In response to the settlement, Genesis expressed satisfaction with resolving the matter. A spokesperson stated that the firm had taken significant measures to address historical deficiencies and is pleased to have resolved them. The spokesperson emphasized that the company voluntarily ceased its operations in September 2023 and is winding down its business for reasons unrelated to the settlement.
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| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 |
| Sentiment | negative |
| Relevance Score | 1 |
| People | Adrienne Harris, Sam Bankman-Fried |
| Companies | Genesis Global, Treasury Department, Securities and Exchange Commission, TradingView.com, Three Arrows Capital, Alameda Research, New York Department of Financial Services, Digital Currency Group, Shutterstock |
| Currencies | None |
| Securities | None |
