NYDFS Imposes $8 Million Penalty on Genesis Global Trading, Inc. Over AML and Cybersecurity Failures

The New York State Department of Financial Services (NYDFS) Superintendent Adrienne A. Harris has announced an $8 million penalty against Genesis Global Trading, Inc. The penalty comes after a comprehensive investigation by the NYDFS revealed substantial shortcomings in the company's Anti-Money Laundering (AML) and cybersecurity programs, violating the department's virtual currency regulations. This enforcement marks the first penalties imposed by the NYDFS on virtual currency companies and underscores its commitment to upholding regulatory standards.

Superintendent Harris emphasized the importance of the NYDFS's virtual currency and cybersecurity regulations, often considered the gold standard in the industry. The regulations are designed to establish clear and stringent requirements to protect consumers and institutions from potential risks posed by bad actors in the financial space. Genesis Global Trading's failure to maintain a functional compliance program demonstrated a disregard for these regulatory requirements, leaving the company and its customers vulnerable to illicit activity and cybersecurity threats.

The NYDFS, under Superintendent Harris, has been proactive in imposing penalties on virtual currency companies, with more than $140 million in penalties levied to date to hold entities accountable. The enforcement action against Genesis Global Trading comes after routine examinations and an ensuing enforcement investigation that unveiled deficiencies in various areas, including Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance, transaction monitoring, Suspicious Activity Report (SAR) filings, Office of Foreign Assets Control (OFAC) screening, and cybersecurity.

Genesis Global Trading, Inc., a separate entity from Genesis Global Capital, LLC, was the only Genesis entity licensed by the NYDFS. It was not involved in the Gemini Earn program. The settlement requires Genesis Global Trading to surrender its BitLicense, and the company is in the process of ceasing operations.

The NYDFS continues to set high standards for the prudential regulation of virtual currency. Superintendent Harris' VOLT initiative has added over 60 experts to oversee licensing and strengthen supervision in areas such as BSA/AML laws and regulations, accounting oversight, financial crimes, data governance, cybersecurity, and more. The department has enhanced existing policies, established new procedures, and enacted new assessment authority to support the growth of the virtual currency unit.

In addressing emerging issues, the NYDFS has issued eight pieces of innovative industry regulatory guidance, including criteria for USD-backed stablecoins, guidance for customer protection in virtual currency insolvency events, and recommendations for the use of blockchain analytics tools. Under Superintendent Harris, the NYDFS has undertaken its first supervisory and enforcement actions against cryptocurrency companies, demonstrating a commitment to maintaining market integrity and protecting consumers.

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