New York’s attorney general has secured a $2bn settlement with the bankrupt cryptocurrency lender Genesis Global over allegations it had defrauded thousands of investors.

Genesis, which filed for Chapter 11 bankruptcy in the US in January 2023, received court approval last week to return about $3bn in cash and cryptocurrency to its customers in a liquidation.

“Once again, we see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry,” said the New York attorney general, Letitia James.

On Monday, James announced a victims fund, established through the settlement, to “help defrauded investors”, including at least 29,000 New Yorkers said to have contributed more than $1.1bn to Genesis through its Gemini Earn scheme. James said it was the largest settlement that New York state had ever reached with a cryptocurrency company.

“When investors suffer losses because of fraud and manipulation, they deserve to be made whole,” said James. “This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice.

James first filed a lawsuit against Genesis last October, accusing it of having concealed losses from investors who provided digital assets through Gemini Earn. Under the settlement, the firm has neither admitted or denied the allegations.

Genesis was among several crypto casualties caught up in the collapse of FTX, which had been one of the world’s largest exchanges.

“New York investors deserve the peace of mind that comes from a properly regulated marketplace,” she added.