n recent news, Genesis Global, a subsidiary of Digital Currency Group (DCG), has reached a settlement agreement with the US Securities and Exchange Commission (SEC). The agreement aims to put an end to a civil lawsuit brought against Genesis for its involvement in the now-terminated Gemini Earn program. As part of the settlement, Genesis has agreed to pay a $21 million civil penalty, subject to its ability to repay its customers and creditors under Chapter 11 bankruptcy proceedings.
Resolving SEC Allegations
The SEC accused Genesis Global and Gemini Trust Company of engaging in an unregistered offer and sale of securities to US retail investors through the Gemini Earn program. The lawsuit alleged violations of Sections 5(a) and 5(c) of the Securities Act 1933. Initially, Genesis sought to dismiss the case, but after extensive negotiations, the parties have now reached an agreement.
According to court documents filed in the New York bankruptcy court, the settlement agreement states 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 a complete satisfaction of the SEC's civil action claim. However, 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 Progression
The proposed settlement agreement is designed to benefit the Debtors' estates and aims to eliminate the risks, expenses, and uncertainties associated with prolonged litigation against the SEC. The effectiveness of the settlement agreement is contingent upon the entry of the Final Judgment by the District Court, following approval from the bankruptcy court.
If the Bankruptcy Court does not approve the Settlement Agreement before issuing a non-appealable discharge order, the SEC can petition the District Court for an order determining the amount of disgorgement, pre-judgment interest, and/or civil penalty.
The $21 million settlement between Genesis Global and the SEC marks a significant development in the legal battle surrounding the Gemini Earn program. This 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.