Genesis Global Trading, a subsidiary of Digital Currency Group (DCG), has agreed to pay an $8 million penalty following a settlement with the New York Department of Financial Services (NYDFS).
The settlement, reached on January 12th, comes after NYDFS conducted an investigation that revealed significant shortcomings in Genesis Global Trading’s anti-money laundering (AML) and cybersecurity programs, leaving the company vulnerable to illicit activities and cybersecurity threats.
Genesis Global Trading’s compliance failures
NYDFS noted that Genesis Global Trading, Inc. and Genesis Global Capital, LLC are distinct entities, with only Genesis Global Trading, Inc. holding a license from NYDFS and not part of the Gemini Earn program.
The investigation found that Genesis Global Trading had failed to meet the required standards in several crucial areas, including Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance, transaction monitoring, filing Suspicious Activity Reports (SAR), conducting Office of Foreign Assets Control (OFAC) screening, and maintaining cybersecurity.
As part of the settlement agreement, Genesis Global Trading will surrender its BitLicense and is currently shutting down its operations. Superintendent Adrienne A. Harris expressed concern about the company’s compliance lapses, stating,
“DFS’s virtual currency and cybersecurity regulations are often cited as the gold standard, providing clear and stringent requirements to protect consumers and safeguard institutions from bad actors. Genesis Global Trading’s failure to maintain a functional compliance program demonstrated a disregard for the Department’s regulatory requirements and exposed the company and its customers to potential threats.”
NYDFS’s actions against crypto firms
Under Superintendent Harris’s leadership, NYDFS has taken significant steps to supervise and enforce regulations within the cryptocurrency industry. This includes initiating supervisory measures and enforcement actions against various crypto firms. Notably, NYDFS was the world’s first regulator to take action against Binance, one of the largest cryptocurrency exchanges globally.
Previously, NYDFS had ordered Paxos to halt the minting of the BUSD stablecoin and negotiated one of the largest digital asset settlements globally with Coinbase. Superintendent Harris highlighted the compliance shortcomings of Coinbase, emphasizing that they had left the platform vulnerable to various criminal activities, including fraud, potential money laundering, suspected involvement in child sexual abuse material, and potential narcotics trafficking.
