New York Attorney General Letitia James filed a major lawsuit in October 2023 against cryptocurrency company Genesis Global and its affiliates and partners over allegations that it defrauded investors in the state and elsewhere by concealing losses of more than $1 billion.

On Monday, James announced that she had reached an out-of-court settlement with the company worth $2 billion that would be repaid to investors in New York and elsewhere to cover their losses, according to Newsweek.

That settlement, and a related Victim's Fund to compensate investors, including more than 29,000 in New York alone, will take effect once Genesis completes the bankruptcy process it began in January 2023 and all other creditors are first made whole.

$2 billion settlement agreement reached

In a Monday press release, AG James revealed the settlement agreement her office had reached with Genesis Global, Genesis Asia Pacific PTE, and Genesis Global Holdco in the amount of $2 billion -- the largest settlement of its kind in state history involving a cryptocurrency firm.

"When investors suffer losses because of fraud and manipulation, they deserve to be made whole," James said. "This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice."

"Once again, we see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry," she added. "New York investors deserve the peace of mind that comes from a properly regulated marketplace, and that is something my office will always act to achieve."

Notably, per the press release, Genesis Global will neither admit nor deny the allegations of fraud in the lawsuit, and that suit will continue against other named defendants, including a partner firm known as Gemini Trust Company.

It was further revealed that, if all creditors are not made whole for the value of their digital assets after the bankruptcy proceedings are complete, the AG's Office is authorized to receive up to $2 billion in the company's remaining assets for a Victims' Fund that will be established. The settlement also prohibits Genesis from doing business in the state of New York going forward.

Bankruptcy plan and NYAG settlement approved by judge

The Associated Press reported Monday that New York Bankruptcy Judge Sean Lane approved a $3 billion plan submitted by Genesis Global to refund creditors and investors who'd been defrauded and misled about the risks of investing in a program known as Gemini Earn.

Creditors who'd loaned money to Genesis will likely receive 100% of their money back, while those who invested crytocurrency assets with the company may suffer a shortfall depending upon the current values of those digital assets.

Newsweek reported that Genesis Interim CEO Derar Islim said in a statement, "Our goal throughout this process has been to maximize value for all creditors, and we are gratified that the court approved both our Plan and the NYAG settlement agreement. We look forward to putting the Plan into effect and making distributions as expeditiously as possible."

They added that all creditors would be compensated "in the form of the original assets they loaned as much as possible, rather than being limited to the USD value of the cryptocurrency assets as of the petition date and converting these into cash or other forms of repayment that might not reflect the current or future value of the cryptocurrency assets."

Company settled with SEC for $21 million in March

The news of the settlement and bankruptcy plan comes just two months after the U.S. Securities and Exchange Commission announced that it had reached a settlement with Genesis Global in which it would neither admit nor deny the federal agency's charges that it "engaged in the unregistered offer and sale of securities" in exchange for the payment of a $21 million civil fine, which would be paid after all other creditors and investors were reimbursed for their losses.

"We charged Genesis with failing to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors," SEC Chair Gary Gensler said at the time. "Today’s settlement builds on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law."