Key takeaways :
- New York AG Letitia James sues Genesis Global, DCG, and Gemini, claiming over $1 billion in investor fraud.
- Lawsuit focuses on the “Gemini Earn” program, where customers could lend crypto, including bitcoin, to Genesis.
In a recent development, New York State Attorney General Letitia James has taken legal action against cryptocurrency companies Gemini and Genesis, alleging that they defrauded over 230,000 investors, including nearly 30,000 New Yorkers, resulting in losses exceeding $1 billion.
The lawsuit, filed by the state’s top law enforcement officer, claims that Gemini, a crypto exchange operator, and DCG’s Genesis Global Capital unit failed to disclose the financial risks associated with a crypto-lending program initiated in 2021.
The crypto-lending program faced significant challenges, leading to its collapse last year, which coincided with the bankruptcy of entities like FTX, owned by Sam Bankman-Fried. Notably, Gemini, founded by Tyler Winklevoss and Cameron Winklevoss, is accused of misleading customers regarding the risks associated with loans in partnership with Genesis.
Furthermore, they allegedly concealed the fact that nearly 60% of their third-party loans went to Bankman-Fried’s crypto trading firm, Alameda Research.
State Attorney General Letitia James has also accused Genesis and its parent company, DCG, of attempting to conceal losses exceeding $1 billion. As a result of these allegations, James seeks to bar Gemini, Genesis, and DCG from operating within the investment industry in New York.
She is also pursuing damages, restitution, and disgorgement of all funds and cryptocurrencies earned as part of the alleged fraudulent activities.
James expressed her concerns, stating, “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.’
“Hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn.”
This lawsuit is part of a broader trend, following legal actions taken by the federal Department of Justice against figures like Mashinsky and FTX founder Sam Bankman-Fried, both of whom have pleaded not guilty.
Attorney General James underscored the need for enhanced regulation in the cryptocurrency industry, characterizing this case as “another example of bad actors causing harm throughout the under-regulated cryptocurrency industry.“