- January 15, 2024
- Posted by: [email protected]
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Genesis Global Trading, a subsidiary of Digital Currency Group, has reached a settlement with the New York State Department of Financial Services (NYDFS), agreeing to pay an $8 million penalty to resolve allegations of compliance failures. This settlement comes after the NYDFS accused the company of violating virtual currency and cybersecurity regulations, exposing itself to illicit activities and cybersecurity threats.
The settlement, announced on Friday, compels Genesis Global Trading to suspend operations in New York and surrender its BitLicense, a mandatory license for engaging in virtual currency activities within the state. NYDFS Superintendent Adrienne A. Harris expressed concern over the company’s lack of a functional compliance program, citing a disregard for regulatory requirements that jeopardized both the company and its customers.
Following routine examinations and an enforcement investigation, NYDFS identified shortcomings 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 for its lack of comprehensiveness and failure to identify areas requiring improvement.
NYDFS’s stringent virtual currency and cybersecurity regulations aim to safeguard consumers and institutions from potential threats. Genesis Global Trading’s failure to maintain a functional compliance program showcased a disregard for these regulations. The $8 million penalty adds to the series of penalties imposed by NYDFS on virtual currency companies, totaling more than $140 million to date.
The New York State Department of Financial Services (DFS) remains a leading authority in prudential regulation of virtual currency. Superintendent Adrienne A. Harris has played a pivotal role in advancing regulatory frameworks at both the state and global levels, collaborating with regulators in various jurisdictions.
DFS has expanded its team as part of Superintendent Harris’ VOLT effort, adding over 60 experts in BSA/AML laws, accounting oversight, financial crimes, data governance, and cybersecurity. The DFS has 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, covering topics such as 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. The settlement with Genesis Global Trading comes amid an ongoing lawsuit filed by the New York Attorney General’s Office in October, accusing the company of defrauding investors by concealing over $1 billion in losses. Genesis Global Trading has faced legal challenges, including SEC charges in January, leading to bankruptcy proceedings to recover lost investor funds. Despite this, Digital Currency Group (DCG), the parent company, reportedly plans to file a motion to dismiss the lawsuit with the New York Attorney General’s office.
