Genesis Global Trading Resolves Compliance Issues with NYDFS, Forfeits BitLicense and Pays $8 Million

On Jan 13, 2024

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Genesis Global Trading, a subsidiary of the Digital Currency Group, recently reached a settlement with the New York State Department of Financial Services (NYDFS). This agreement involves a penalty of $8 million following allegations of failing to comply with virtual currency and cybersecurity regulations. These shortcomings heightened the company’s vulnerability to illicit activities and cybersecurity threats.

NYDFS’s investigation, which included routine examinations and an enforcement inquiry, revealed that Genesis Global Trading did not meet the required standards in several critical areas. These include compliance with the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations, effective transaction monitoring, the filing of Suspicious Activity Reports (SARs), adherence to the Office of Foreign Assets Control (OFAC) screening requirements, and maintaining robust cybersecurity measures. The NYDFS particularly pointed out that the company’s cybersecurity risk assessment was inadequate, lacking a comprehensive approach and failing to pinpoint areas in need of improvement.

Cease Operations in New York and Surrender BitLicense

As part of the settlement, Genesis Global Trading is mandated to cease its operations within New York State and surrender its BitLicense, a prerequisite for conducting virtual currency-related activities in the state. NYDFS Superintendent Adrienne A. Harris expressed her concerns regarding the company’s disregard for maintaining a functional compliance program, which exposed both the firm and its clients to potential risks.

Meanwhile, the New York State Department of Financial Services (DFS) under Superintendent Adrienne A. Harris continues to lead the way in the prudential regulation of virtual currency. The DFS, with Harris at the helm, has been instrumental in shaping regulatory frameworks at the state level and collaborating with global regulators, including those in Illinois, California, the United Kingdom, the European Union, the United Arab Emirates, and Singapore. The VOLT initiative, spearheaded by Superintendent Harris, has seen the DFS team grow by over 60 experts, enhancing licensing oversight and supervision in areas such as BSA/AML laws, financial crimes, data governance, and cybersecurity. The DFS has also fortified its policies and procedures, playing a pivotal role in the development of regulatory standards worldwide.

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
More here: https://t.co/lVY2TfitRr pic.twitter.com/eiyYsgrWUY
— NYDFS (@NYDFS) January 12, 2024

Furthermore, the DFS has issued eight groundbreaking regulatory guidances, addressing critical issues like USD-backed stablecoins, virtual currency insolvency, and the use of blockchain analytics tools. Under Harris’s direction, the DFS has taken decisive supervisory and enforcement actions against cryptocurrency firms, negotiating major settlements and addressing compliance issues head-on, as seen in the case with Genesis Global Trading.

Defrauding Investors of $1 Billion in Losses

Additionally, the New York Attorney General’s lawsuit against Genesis Global Trading, which accused the company and its parent entities, DCG and Gemini Trust, of defrauding investors by hiding over $1 billion in losses, is also worth noting. Genesis Global Trading has faced numerous legal challenges over the past year, including charges by the Securities Exchange Commission (SEC) for selling billions in unregistered securities. Currently in bankruptcy proceedings, Genesis is working to recover investor funds, while DCG is reportedly planning to challenge the Attorney General’s lawsuit.

The NYDFS’s stringent standards for virtual currency and cybersecurity regulations aim to safeguard consumers and institutions from potential threats. The $8 million penalty imposed on Genesis Global Trading is a testament to NYDFS’s commitment to enforcing these standards, as part of a broader effort to regulate the virtual currency industry, with penalties totaling over $140 million to date.