Genesis Global Trading Settles with NYDFS for $8 Million Over Compliance Failings

Digital Currency Group (DCG) subsidiary – Genesis Global Trading – reached a settlement with the New York Department of Financial Services (NYDFS) on January 12th. Genesis will pay an $8 million penalty after an agency’s investigation found significant failings in anti-money laundering and cybersecurity programs.

NYDFS said the compliance failures left the company vulnerable to illicit activity and cybersecurity threats.

Genesis’ Compliance Lapses

According to the official announcement, Genesis Global Trading, Inc. and Genesis Global Capital, LLC are distinct entities. Among the Genesis entities, only Genesis Global Trading, Inc. holds a license from the NYDFS and was not part of the Gemini Earn program.

After regular inspections and a subsequent enforcement inquiry, it was revealed that Genesis Global Trading did not adhere to the required standards in 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 deal, Genesis Global Trading will also surrender its BitLicense and is in the process of shutting its operations.

In a statement, Superintendent Adrienne A. Harris said,

“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 Actions Against Crypto

Under Superintendent Harris, DFS initiated its first supervisory and enforcement measures targeting crypto firms. Moreover, the DFS was the world’s first regulator to take action against Binance.

It had ordered Paxos to stop minting the BUSD stablecoin and negotiated one of the largest digital asset settlements in the world with Coinbase.

At that time, Harris mentioned that the compliance shortcomings of Coinbase had left the platform vulnerable to severe criminal activities, including but not limited to fraud, potential money laundering, suspected involvement in child sexual abuse material, and potential narcotics trafficking.