Genesis Global Trading, a subsidiary of Digital Currency Group, has agreed to pay an $8 million penalty to the New York State Department of Financial Services (NYDFS) after settling allegations of compliance failures. The NYDFS accused the company of violating virtual currency and cybersecurity regulations, leading to its vulnerability to illicit activities and cybersecurity threats.
The settlement, announced on Friday, mandates Genesis Global Trading to cease its operations in the state of New York and surrender its BitLicense, which is required for engaging in virtual currency activities in the state.
NYDFS Superintendent Adrienne A. Harris expressed concern over the company’s failure to maintain a functional compliance program, stating that it demonstrated a disregard for regulatory requirements and exposed both the company and its customers to potential threats.
NEW: Superintendent Adrienne A. Harris Announces $8 Million Penalty Against Genesis Global Trading, Inc. After DFS Investigation Finds Significant Failings in Anti-Money Laundering and Cybersecurity Programs
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— NYDFS (@NYDFS) January 12, 2024
Following routine examinations and an enforcement investigation, NYDFS found that Genesis Global Trading fell short of the required standards in various areas, including Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance, transaction monitoring, Suspicious Activity Report (SAR) filings, Office of Foreign Assets Control (OFAC) screening, and cybersecurity.
The regulator specifically criticized the company’s cybersecurity risk assessment, stating that it was not sufficiently comprehensive and lacked the identification of areas requiring improvement.
NYDFS’s virtual currency and cybersecurity regulations are considered stringent standards designed to protect consumers and institutions from potential threats. Genesis Global Trading’s failure to maintain a functional compliance program demonstrated a disregard for these regulatory requirements. The $8 million penalty adds to the growing list of penalties imposed by NYDFS on virtual currency companies, amounting to more than $140 million to date.
NYDFS Superintendent Adrienne A. Harris Advances Prudential Regulation of Virtual Currency
The New York State Department of Financial Services (DFS) remains at the forefront of prudential regulation of virtual currency.
Superintendent Adrienne A. Harris has been instrumental in advancing regulatory frameworks not only at the state level but also by collaborating with regulators globally, including in Illinois, California, the United Kingdom, the European Union, the United Arab Emirates, and Singapore.
DFS aims to share its expertise and experience to contribute to the development of effective regulatory standards worldwide.
Under Superintendent Harris’s VOLT initiative, the DFS has expanded its team by adding more than 60 experts, reinforcing licensing oversight and supervision. The experts specialize in various areas, including Bank Secrecy Act/Anti-Money Laundering laws, accounting oversight, financial crimes, data governance, cybersecurity, and more.
The DFS has also strengthened its policies, established new procedures, and gained new assessment authority to support the growing virtual currency unit.
To address emerging issues, DFS has issued eight pieces of innovative industry regulatory guidance, including criteria for USD-backed stablecoins, customer protection during virtual currency insolvency, and guidance on using blockchain analytics tools.
Under Superintendent Harris’s leadership, DFS has taken supervisory and enforcement actions against cryptocurrency companies, including being the first regulator globally to address Binance and negotiating one of the largest virtual currency settlements with Coinbase, Inc.
The New York Attorney General’s Lawsuit Against Genesis Global Trading Sees a Settlement
The agreement comes in the midst of an ongoing lawsuit filed by the New York Attorney General’s Office in October. The lawsuit accuses Genesis Global, alongside its parent companies, Digital Currency Group (DCG) and Gemini Trust, of defrauding investors by concealing over $1 billion in losses.
Genesis Global Trading has encountered legal challenges throughout the past year. In January, the Securities Exchange Commission (SEC) charged the company with selling billions of dollars worth of unregistered securities to hundreds of thousands of investors.
Following the SEC charges, Genesis declared bankruptcy and is currently engaged in court proceedings to recover lost investor funds.
However, DCG is reportedly planning to file a motion to dismiss a lawsuit with the New York Attorney General’s office.
