NY Attorney General Sues DGC, Genesis, and Gemini for Fraud
- An investigation from the New York Attorney General’s office has allegedly found that Gemini was aware of Genesis’ weak financial position, but still lied to investors.
- The lawsuit is looking to ban DCG, Genesis, and Gemini from the New York financial industry, seek restitutions for investments, and the return of “ill-gotten gains”.
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New York Attorney General Letitia James has filed a lawsuit against Digital Currency Group (DCG), Genesis, and Gemini for allegedly defrauding thousands of investors, the Attorney General’s office said in a press release on 19 October.
According to the complaint, an investigation carried out by James’ office claims that cryptocurrency exchange Gemini lied to its users about the Gemini Earn program that it operated in partnership with crypto lender Genesis, which led to defrauding more than 230,000 investors, 29,000 of which were New York citizens, out of more than $1 billion. The lawsuit has also charged Genesis, its former CEO Soichiro Moro, parent company DCG, and its CEO Barry Silbert, with defrauding investors by concealing more than $1.1 billion in losses. Attorney General James said in a statement:
“These cryptocurrency companies lied to investors and tried to hide more than a billion dollars in losses, and it was middle-class investors who suffered as a result. Gemini hid the risks of investing with Genesis and Genesis lied to the public about its losses. This fraud is yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry.”
The Attorney General’s investigation suggest that Gemini was aware that Genesis’ loans were undersecured, and worried about the crypto lender’s relation with Sam Bankman-Fried’s Alameda Research, but still did not reveal this information to its investors. The crypto exchange quickly responded to the lawsuit via X (formerly Twitter), saying that while it agrees that Genesis and DCG lied about their financial health, it “wholly disagree” with NY AG’s decision to also sue Gemini.
The AG’s lawsuit also claims that Gemini and Genesis “falsely Claimed” that they had the necessary governmental licenses, but failed to register under New York’s securities laws. The lawsuit is looking to ban the three companies — Gemini, Genesis, and DCG — from the New York financial industry, as well as seek restitution for investments and the return of “ill-gotten gains”.
- Bankrupt crypto lender Genesis is trying to recover around $500 million from DCG, and another 4,550.5 BTC from DCGI, which it had loaned to the two companies in 2022.
- Both DCG and DCGI requested that the debts were converted to open loans on 9 May, but Genesis declined both offers and demanded the repayment of the loans with interest.
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- Cameron Winklevoss, co-founder of crypto exchange Gemini, proposed a plan that would see Digital Currency Group pay close to $1.5 billion over the next five years.
- The Winklevoss twin said that if the “final offer” is not accepted by the end of the week, Gemini would file a lawsuit against DCG and CEO Barry Silbert.
- Called Coinbase International Exchange (CIE), the new platform will allow institutional users outside of the U.S. to bet on the price of crypto via perpetual futures.
- The platform will not be available to retail customers “at this time”, and will initially provide trading of only BTC and ETH perpetual futures, settled in the USDC stablecoin.