Genesis hid a $1.1B hole with a 10-year IOU — New York billed the estate $2 billion

Genesis Global Capital lent out customer crypto raised through Gemini's Earn program, marketed as low-risk with returns of up to 8%. In June 2022, Three Arrows Capital — a large borrower that had not supplied audited financials for over two years — defaulted on billions; Genesis also lost $100M+ on Babel Finance. Losses exceeded $1.1 billion. Instead of disclosing, Genesis and its parent Digital Currency Group entered a $1.1 billion promissory note: DCG would pay Genesis back over a decade at 1% interest, and Genesis booked the note as a current asset, convertible within a year.

The New York Attorney General's October 2023 lawsuit says the concealment was operational. Two days after the 3AC default, Genesis and DCG tweeted that 'the Genesis balance sheet is strong and our business is operating normally.' Genesis's CFO postponed the footnotes that would have exposed the note, explaining in a Teams chat that '[i]n the notes, we are required to disclose a lot of things which will highlight what happened.' Gemini had internally cut Genesis to junk-grade CCC in February 2022 — while still telling Earn investors the program was low-risk.

In February 2024 Genesis's estate struck a settlement with the Attorney General while DCG fought it. The parent, itself a large creditor, told the bankruptcy court the deal was a 'back-door attempt to circumvent U.S. bankruptcy law' — a 'subversive arrangement, put together last-minute and in secret.' On May 17, 2024, the court confirmed Genesis's Chapter 11 plan and approved the NYAG settlement anyway: a victims' fund worth up to $2 billion if creditors are not made whole, plus a permanent New York operating ban.

The settlement — the largest against a crypto company in New York state history — resolved only the claims against Genesis; the suit continued against DCG, Barry Silbert, former Genesis CEO Soichiro Moro, and Gemini. In January 2025 the SEC added its own: DCG and Moro agreed to pay a combined $38.5 million in civil penalties for downplaying the 3AC default and touting a 'strong' balance sheet on social media.

230,000+ Gemini Earn investors (29,000+ New Yorkers) lost over $1 billion; the estate settled for a fund worth up to $2B plus a New York operating ban.

The note was a delay device, not a recovery: 1% interest over ten years can't plug a hole created by a default that had already happened — it only moved the reckoning past the next earnings cycle.

Classification was the lie. Calling a decade-long receivable a 'current asset' told Gemini and its users the money was reachable, when the whole point of the note's terms was that it wasn't.

The counterparty diligence never existed: Genesis had gone two years without audited financials from 3AC before lending it billions — the hole was avoidable, which made the concealment indefensible.

The cover-up spread through the family: DCG's own filing against its subsidiary's settlement left even the parent opposed to the cheapest resolution for victims.

Internal channels captured the evidence: the CFO's Teams chat and Gemini's junk-grade internal downgrade proved the companies knew exactly what they were hiding.

A parent that patches a subsidiary's hole with an IOU inherits the fraud: book a 10-year note as a current asset, delay the footnotes, tweet strength — and the whole corporate family pays.

The court confirmed Genesis's amended plan and approved the NYAG settlement on May 17, 2024. The victims' fund receives estate distributions after initial creditor payouts, topping up to $2 billion if investors are not made whole at digital-asset values, and Genesis is permanently banned from operating in New York. The fraud suit continued against DCG, Silbert, and Moro; Gemini settled with the Attorney General for $50 million in June 2024; and in January 2025 the SEC settled with DCG and Moro for a combined $38.5 million over the same 'strong balance sheet' statements.