Letitia James warns crypto firms: ‘Play by same rules’ or…

• NYAG Letitia James maintained a strict stance on crypto after the $2B Genesis settlement. 
• NYAG warned other crypto firms to face consequences if they don’t play by the rules.

New York Attorney General (NYAG) Letitia James has warned crypto firms to ‘play by the same rules’ as everyone.

James issued the warning on X (formerly Twitter) following a $2 billion settlement with bankrupt crypto firm Genesis, a subsidiary of Digital Currency Group (DCG). 

“Crypto companies must play by the same rules as everyone else. We will go after those that don’t.”

The bankrupt crypto lender Genesis secured court approval for about $3 billion payout last week, a move that sidelined its parent firm, DCG, from claims. 

NYAG Letitia James reinforces strict crypto stance

Last October 2023, NYAG sued Genesis and alleged that the firm defrauded investors and concealed its loan book deficits. Part of NYAG’s statement read, 

“Genesis, along with other defendants, concealed more than $1.1 billion in losses from investors that provided digital assets through an investment program called “Gemini Earn”

The Gemini Earn allowed investors to earn interest on their crypto assets. However, the arrangement with ‘risky’ Genesis exposed investors to losses.

Genesis concealed $1.1 billion in risky losses that were reportedly linked to loans to bankrupt Three Arrows Capital (3AC) and Babel Finance. 

According to NYAG, 29000 New Yorkers were among the victims who deserved to be made whole by the bankrupt firm and its associates. The $2 billion settlement will help with that. 

‘This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice.’

James added that the investors’ losses were primarily due to a ‘lack of oversight and regulation within the cryptocurrency industry.’

On his part, Genesis interim CEO, Derar Islim, noted that the firm’s goal has been to ‘maximize value for all creditors’ and was happy with the settlement agreement. 

It’s worth noting that NYAG has secured several fines and settlements against various crypto firms, including Kucoin. The $2 billion Genesis settlement reinforces the office’s crackdown on ‘rogue’ crypto firms. 

Some market watchers have long blamed crypto woes on the US’s lack of regulatory clarity.

However, the passage of the FIT21 Act in the US House was a stepping stone that could help with that if it passes the US Senate and becomes a law.