- An audit by the Comptroller of New York revealed shortfalls in DFS inspections
- Genesis did not comply with New York’s virtual currency and cybersecurity laws
New York’s Department of Financial Services (DFS) reached a settlement with Genesis Global Trading, under which the latter will lose its license, pay an $8 million fine, and stop operating, the Times Union wrote.
The department made this announcement after an audit by the Comptroller of the state of New York revealed shortfalls in the inspection of entities during the BitLicense application process. According to the Comptroller, the department did not examine licensees as regularly as required.
Obligations of the DFS
The DFS supervises financial institutions and insurance companies in New York, issues permits and licenses, and monitors business activity, including of digital currency providers. It is responsible for monitoring the financial sector to ensure the industry is stable, protect consumers from scams, and promote New York’s economic growth and prosperity.
Incompliance with the law
The audit was released eight months after New York Attorney General Letitia James pushed for a law to increase transparency of the cryptocurrency industry. The law, called the Crypto Regulation, Protection, Transparency, and Oversight Act, was aimed at increasing the DFS and the attorney general’s office’s authority over digital currency companies. It would also ban brokers from lending or borrowing customer assets.
The settlement with Genesis Global Trading was reached after it emerged Genesis had not complied with New York’s virtual currency and cybersecurity laws. Routine inspections are supposed to be done every other year, but the agency was conducting them once every three years. According to the audit, the DFS could not prove it “followed up” on issues detected during routine examinations.
The DFS issued Genesis Global Trading a BitLicense back in 2018. According to Adrienne Harris, superintendent of the Department of Financial Services:
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.
These developments follow a large-scale lawsuit brought against Genesis and its affiliates, Gemini Trust Company, and Digital Currency Group (DCG) by the attorney general’s office for defrauding almost a quarter of a million investors of more than $1 billion.
