Crypto Crackdown: Genesis Pays $8 Million and Loses License After AML Failures

Following an investigation that revealed substantial deficiencies in its anti-money laundering and cybersecurity programs, Genesis Global Trading, a subsidiary of Digital Currency Group, has agreed to pay an $8 million penalty and voluntarily surrender its license from the regulator, according to the New York Department of Financial Services. The regulatory body, which granted Genesis its BitLicense in 2018, stated in a press release that the cryptocurrency market-maker and brokerage firm lacked “effective risk assessment, supervisory, or control frameworks” to ensure compliance with the state’s virtual currency and cybersecurity regulations.

It also did not file suspicious activity reports promptly or conduct Office of Foreign Assets Control screening. The DFS says that the Genesis platform will be subject to further enforcement action if these shortcomings aren’t addressed.

DFS Superintendent Adrienne Harris says the settlement resulted from an investigation that found Genesis did not meet minimum standards for Bank Secrecy Act and Anti-Money Laundering compliance. The DFS said it also needed to maintain an effective compliance program for its anti-money laundering and Bank Secrecy Act requirements, including transaction monitoring, filing suspicious activity reports, Office of Foreign Assets Control screening, and a robust risk assessment.

According to a separate DFS press release, the DFS’s investigation into Genesis focused on a lending program called Gemini Earn, offered through a separate DFS-licensed Genesis entity, Gemini Trust Company. The DFS said it had concerns that the program may have offered unregistered securities, which are illegal under federal and state law. Gemini Earn was withdrawn in January 2023.

The DFS’s decision to issue an $8 million fine for Genesis comes after the crypto giant ran into several regulatory setbacks in recent years. Genesis’ lending arm worked with failed firms like Three Arrows Capital and Sam Bankman-Fried’s Alameda Research in 2022, leading to the parent firm’s bankruptcy and lawsuits from the SEC and the New York attorney general.

DFS has imposed over $140 million in fines on crypto firms since Harris became its superintendent in late 2021, including a record $30 million fine on stablecoin issuer Paxos last year—Fortune Crypto’s daily roundup of the coins, companies and people shaping the world of crypto. Subscribe today to get all the latest news, analysis, and video on everything happening in the crypto industry.

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