The New York Department of Financial Services (NYDFS) has imposed an $8 million penalty on Genesis Global Trading, a Digital Currency Group (DCG) subsidiary, for violating anti-money laundering and cybersecurity rules. The crypto firm must also surrender its license to operate in the state.
According to a statement from NYDFS, Genesis – a cryptocurrency market-maker and brokerage firm – did not have an effective compliance program for anti-money laundering and Bank Secrecy Act requirements. The firm also did not file enough Suspicious Activity Reports, which are mandatory for financial institutions to report certain transactions to law enforcement.
“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,” said Adrienne Harris, the Superintendent of NYDFS.
As part of the penalty, Genesis will have to give up its “BitLicense,” a license that NYDFS grants cryptocurrency companies to offer certain services within the state. BitLicense requires that companies comply with know-your-customer, anti-money laundering, and capital requirements.
Genesis Global Trading Faces NYDFS Consequences
The move follows the bankruptcy filing of Genesis Global Capital, another DCG entity separate from Genesis Global Trading. Genesis Global Capital was a crypto lender hit by the collapse of cryptocurrency exchange FTX last year. The lender did not have a BitLicense from NYDFS.
FTX, one of the world’s largest crypto exchanges, shut down in November 2022 after suffering a massive hack that resulted in the loss of over $8 billion worth of cryptocurrencies. The exchange also faced legal actions from regulators and investors for allegedly operating illegally and manipulating the market.
The NYDFS settlement with Genesis Global Trading is the latest example of the regulatory challenges and risks that crypto firms face in the US and other jurisdictions. While some crypto advocates argue that BitLicense is too restrictive and burdensome, others see it as a necessary framework to ensure consumer protection and financial stability.
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