Dear Mr. Larson:

Attached please find the Department's determination pertaining to the aforementioned FOIL request. Because your request has been answered, your request is now closed.

Tracking Number:FOIL-2024-097182-022476

SENT VIA EMAIL

Email: G@xny.io, michaelspafford@paulhastings.com

July 26, 2024

Mr. Gunnar Larson

xNY.io – Bank.org

406 West 25th Street

New York, NY 10001

Mr. Michael Spafford

Paul Hastings LLP

2050 M Street NW

Washington DC, 20036

Re: Freedom of Information Law (“FOIL”) Tracking No. 2024-097182

Dear Mr. Larson and Mr. Spafford,

This letter serves as a final determination of the FOIL request received by the New York State Department of

Financial Services (“Department”) on January 16, 2024, seeking records relating to Genesis Global Trading (“Genesis”),

and as a trade secret determination for the request submitted by Genesis that records it submitted to the Department

continue to be excepted from FOIL disclosure under N.Y. Public Officers Law § 87(2)(d).

The Department received a FOIL request, which reads as follows:

1. Any and all records concerning the New York State Department of Financial Services (DFS)

investigation of Genesis Global Trading, Inc. (“Genesis Global Trading”) leading to seizure of the

firm's BitLicense.

2. Additionally, xNY.io - Bank.org seeks access to records that explain DFS' calculated $8 million

penalty to New York State for compliance failures that violated DFS’s virtual currency and

cybersecurity regulations and left the company vulnerable to illicit activity and cybersecurity

threats. xNY.io - Bank.org notes DFS has recently published other BitLicense penalties of $100M

and $30M. As such, we aim to review accessible records in congruence with Genesis' $8M penalty.

3. xNY.io - Bank.org seeks records that indicate any human rights violations part of the compliance

failures that violated DFS’s virtual currency and cybersecurity regulations and left the company

vulnerable to illicit activity and cybersecurity threats.

4. Finally, xNY.io - Bank.org seeks any and all STX records associated with the Genesis

investigation.

As a preliminary matter, Genesis’ BitLicense was not seized, but was surrendered voluntarily. Additionally, the

Department has no records responsive to the fourth portion of the request. To the extent the first three parts of the FOIL

request are reasonably described, the Department construes the request as seeking all records and correspondence exchanged

between Genesis and the Department, and all records created by the Department in connection with the Department’s

Consent Order dated January 3, 2024 (“Investigation Materials”).

I. Trade Secret Determination

In accordance with Public Officers Law § 89(5)(a)(1), at the time that Genesis submitted these records to the

Department, Genesis requested that the Investigation Materials be excepted from public disclosure pursuant to Public

Officers Law § 87(2)(d). That statute provides an exception from disclosure for records or portions thereof that “are trade

secrets or are submitted to an agency by a commercial enterprise or derived from information obtained from a commercial

enterprise and which if disclosed would cause substantial injury to the competitive position of the subject enterprise.”

Afterwards, the Department notified Genesis of the FOIL request and its right under Public Officers Law §

89(5)(b)(2) to submit a statement of necessity explaining why the Department should continue to except the Responsive

Records from public disclosure (“Statement”). Subsequently, on April 2, 2024, and April 23, 2024, the Department received

Genesis’ Statements requesting that the Department continue to exempt the Investigation Materials from public disclosure

under Public Officers Law § 87(2)(d).

In the Statements, Genesis asserts the Investigation Materials contain confidential financial, operating, and other

proprietary commercial information pertaining to Genesis, and current and former Genesis affiliated entities, which if

disclosed would cause substantial competitive injury to Genesis and its affiliated entities. Genesis asserts the Investigation

Materials document confidential commercial business practices, internal audits and work product, and also reveal the shared

commercial services Genesis provided to other related entities in the Genesis family of companies, such as onboarding,

AML/BSA procedures, cyber-security assessments and reports, marketing, strategy, financial reporting, business contracts

and agreements among the Genesis entities, and other nonpublic commercial activities. Genesis asserts the Investigation

Materials contain the knowledge and understanding of how Genesis operated and the services it provided, and if made

public, would disclose the inner workings and operations of Genesis and its affiliates, provide insight into their operations,

and give the recipient of the information an unfair competitive advantage, resulting in substantial injury to Genesis’

competitive position.

In Encore Coll. Bookstores, Inc. v. Auxiliary Serv. Corp., 87 N.Y.2d 410 (1995), the Court provided the standard

for determining whether records responsive to a FOIL request should be withheld from disclosure due to competitive injury

concerns. In Encore, the New York Court of Appeals held that determining whether an entity suffers competitive injury

from public disclosure of its records within the meaning of Public Officers Law § 87(2)(d), “turns on the commercial value

of the requested information to competitors and the cost of acquiring it through other means.” Id. at 420. The Court’s

holding recognized that the trade secret/competitive injury exemption balances the need for openness in government versus

the need “to protect businesses from the deleterious consequences of disclosing confidential commercial information, so as

to further [New York] State’s economic development efforts and attract business to New York.” Id. Whether disclosing

records, in whole or in part, would cause substantial competitive injury to an entity depends on, among other things, the

nature of the information involved and the area of commerce in which the entity does business. See Committee on Open

Government, Advisory Opinion 10664 (March. 10, 1998).

Applying Encore, the Department agrees that disclosure of the Investigation Materials would cause Genesisto suffer

substantial competitive injury. A competitor who submits a FOIL request for the information would receive a windfall,

since the competitor would have paid only a minimal fee, if any, to obtain proprietary information that Genesis has expended

substantial resources to develop. Additionally, disclosing the Investigation Materials would create an unleveled playing

field, as Genesis does not possess the commercial business practices of its competitors. Therefore, disclosing the

Investigation Materials would unfairly benefit Genesis’ competitors, thereby causing Genesis to suffer substantial injury to

its competitive position.

Based upon the Statements and pursuant to Public Officers Law § 87(2)(d), the Department determines that

disclosing the Investigation Materials would cause substantial injury to the competitive position of Genesis and therefore

the Investigation Materials will not be disclosed pursuant to that section of law.

Pursuant to Public Officers Law § 89(5)(c), the requester, Gunnar Larson, may appeal this portion of the 

determination to withhold records within seven business days by sending an email to Christine Tomczak, Assistant Counsel, 

New York State Department of Financial Services at FOIL.Appeals@dfs.ny.gov.

III. Final Determination 

Additionally, the Department is withholding portions of the Investigation Materials pursuant to Public Officers Law 

§ 87(2)(i), which exempts records or portions thereof that, “if disclosed, would jeopardize the capacity of . . . an entity that 

has shared information with an agency to guarantee the security of its information technology assets, such assets 

encompassing both electronic information systems and infrastructures.” The purpose of that exemption is to permit an 

agency to withhold access to codes which, if disclosed, would provide the requestor with the ability to gain unauthorized 

access to information. See Committee on Open Government Advisory Opinion No. 18911 (June 29, 2012).

Records submitted by Genesis and created by the Department contain information pertaining to Genesis’ internal 

codes, cybersecurity compliance programs and related procedures, and technology infrastructure. Moreover, in light of the 

recent cyber-attacks involving cryptocurrency exchanges, the Department cannot rule out the possibility that the requested 

records could be used to breach the information technology assets of the entities. Accordingly, the Department is 

withholding certain information responsive to your request pursuant to Public Officers Law § 87(2)(i) to minimize the risk 

of such occurrence.

Furthermore, the Department is withholding certain portions of the Investigation Materials that contain personal 

information pursuant to Public Officers Law § 87(2)(b), which exempts records, or portions thereof, that “if disclosed would 

constitute an unwarranted invasion of personal privacy under the provisions of subdivision two of section eighty-nine of the 

[Public Officers Law].” Public Officers Law § 89(2)1

exempts from disclosure, inter alia, “information of a personal nature 

reported in confidence to an agency and not relevant to the ordinary work of such agency.” Public Officers Law § 

89(2)(b)(v).

Employee records, organizational charts, and other materials in the Investigation Materials submitted by Genesis

that contain personal information are being withheld from disclosure pursuant to § 87(2)(b) to protect the privacy of the 

individuals who were previously employed, and are currently employed by Genesis. 

Finally, the Department will not be releasing portions of the Investigation Materials pursuant to Public Officers 

Law § 87(2)(g), which exempts from disclosure records that are “inter-agency or intra-agency materials which are not: i. 

statistical or factual tabulations or data; ii. instructions to staff that affect the public; iii. final agency policy or 

determinations; [or] iv. external audits, including but not limited to audits performed by the comptroller and the federal 

government[.]” Such internal records contain opinions, recommendations, evaluations, and other subjective commentary by 

government employees, and do not contain information that fall within any of the four exceptions to non-disclosure under 

Public Officers Law § 87(2)(g).

Here, the internal opinions, recommendations, and drafts contain the very kind of information that the exemption 

in Public Officers Law § 87(2)(g) is designed to protect. In New York Times Co. v. City of New York Fire Dep’t, 4 N.Y. 

3d 477, 488-89 (2005), the Court of Appeals held that “[t]he point of the intra-agency exception is to permit people within 

an agency to exchange opinions, advice and criticism freely and frankly, without the chilling prospect of public disclosure 

. . . [and] to permit the internal exchange of candid advice and options between agency employees.” (See also, Miller v. 

New York State DOT, 58 A.D.3d 981, 984 [3rd Dep’t 2009])(holding that “[t]he interagency and intra-agency exemption 

applies to records that are deliberative, i.e., communications exchanged for discussion purposes not constituting final policy 

decisions.”)

1 Public Officers Law § 89(2) provides a non-exhaustive list of the types of information that warrant personal privacy protection. An 

agency may also more broadly withhold items that could cause individuals personal distress, economic hardship or otherwise 

humiliate or stigmatize them. See Matter of NY Times Co. v. City of NY Fire Dept., 4 N.Y. 3d 477, 796 N.Y.S. 2D 302 (2005); see 

also Matter of Rhino Assets, LLC v. New York City Department for the Aging, 60 A.D. 3d 538 (1st Dept. A.D., 2009); Matter of 

James, Hoyer, Newcomer, et.al. v. State of New York Office of Attorney General, 910, N.Y.S. 2d 762 (Supreme Ct., NY County, 

2010).

Because portions of the Investigation Materials reflect opinions, deliberations, and communications between

Department employees, they fall squarely within the intra/inter-agency exception and, accordingly, are also exempt from

disclosure pursuant to Public Officers Law § 87(2)(g).

For the foregoing reasons, the FOIL request is denied.

Pursuant to Public Officers Law § 89(4), the requester, Gunnar Larson, may appeal this portion of the determination

to withhold records within 30 days by sending an email to Christine Tomczak, Assistant Counsel, New York State

Department of Financial Services at FOIL.Appeals@dfs.ny.gov.

Very truly yours,

Stephanie Mazza

Associate Attorney

cc: VIA EMAIL

Shoshanah Bewlay, Executive Director

Committee on Open Government

One Commerce Plaza

99 Washington Avenue, Suite 650

Albany, NY 12231

Shoshanah.Bewlay@dos.ny.gov