$8 Million Fine Against Global Crytpo Trading Platform

In a recent move by the New York Department of Financial Services (NYSDFS), Genesis Global Trading, a prominent crypto currency brokerage and marketplace, has been hit with an $8 million fine and had its BitLicense revoked. The regulatory action comes as a result of the firm’s failure to maintain adequate anti-money laundering (AML) and cybersecurity measures. This marks a significant setback for a company that was granted a BitLicense in 2018, allowing it to engage in various virtual currency business activities.

 

The Crypto BitLicense and Regulatory Compliance

The BitLicense, issued under New York Banking Law, empowered Genesis Global Trading to conduct virtual currency transactions, including buying, selling, maintaining accounts, and issuing cryptocurrency on behalf of consumer investors. However, the New York state regulators, in their settlement action filed on January 4th, highlighted a series of compliance violations spanning the period from May 2018 through March 2022.

Multiple investigations conducted by the NYSDFS revealed serious deficiencies in Genesis Global Trading’s implementation of virtual currency and cybersecurity regulations. The company was found to be “vulnerable to illicit activity and cybersecurity threats,” indicating a failure to establish effective safeguards. Violations included lapses in the Bank Secrecy Act/Anti-Money Laundering (BSA/AML), transaction monitoring, Suspicious Activity Report (SAR) filings, Office of Foreign Assets Control (OFAC) screening, and cybersecurity controls.

 

The Consequences

As a result of the regulatory crackdown, Genesis Global Trading has ceased its operations. The company’s website now carries a notice stating, “Genesis Global Trading, Inc. is no longer an active business,” and directs visitors to a general email address for support. The discontinuation of operations follows the company’s failure to maintain a functional compliance program, as noted by NYDFS Superintendent Adrienne Harris.

Parent Company Digital Currency Group’s Involvement: Genesis Global Trading, founded in 2013, operates as a subsidiary of the Digital Currency Group (DCG). DCG, a venture capital firm, is also the parent company of Genesis Global Capital. Notably, Genesis Global Capital filed for bankruptcy in January 2023, citing devastating losses linked to the collapse of the crypto exchange FTX.

NYDFS Superintendent Adrienne Harris emphasized that Genesis Global Trading’s failure to uphold a functional compliance program showcased a disregard for regulatory requirements. Harris stated that the NYSDFS’s virtual currency and cybersecurity regulations are recognized globally as the gold standard, providing clear and stringent requirements to protect consumers and institutions from malicious actors.

 

Conclusion to the Crypto Case

The regulatory actions against Genesis Global Trading underscore the growing importance of compliance in the cryptocurrency industry. As virtual currencies continue to gain mainstream acceptance, regulators are keen on ensuring that companies adhere to robust AML and cyber security measures. The fallout from Genesis Global Trading’s compliance failures serves as a reminder to industry participants about the necessity of prioritizing regulatory compliance to safeguard both consumers and the integrity of the financial system.