By Reuters | Updated: 19 October 2023
Oct 19 (Reuters) – New York Attorney General Letitia James on Thursday sued cryptocurrency firms Genesis Global and its parent company, Digital Currency Group (DCG), as well as Gemini for allegedly “defrauding” investors of more than $1 billion.
The development underscores the challenges the crypto industry continues to face almost a year after the bankruptcy of Sam Bankman-Fried’s exchange FTX, which led to a meltdown in the sector that overwhelmed several major firms.
Through the lawsuit, Attorney General James is seeking restitution for investors and “disgorgement of ill-gotten gains,” along with a ban on all three from the financial investment industry in New York.
DCG and Gemini did not immediately respond to Reuters’ requests for comment.
At the heart of the Attorney General’s lawsuit is a program that Gemini ran in partnership with Genesis, dubbed “Gemini Earn”. The program allowed customers to lend crypto assets such as bitcoin to Genesis.
Gemini, run by the Winklevoss twins best known for their legal battle against Meta Platforms’ (META.O) Mark Zuckerberg, had billed the program as a “low-risk investment” even when its internal analyses had found Genesis was on risky financial footing, James alleged.
Gemini knew Genesis’ loans were undersecured and at one point highly concentrated with one entity, Bankman-Fried’s crypto hedge fund Alameda that later went belly up, James said.
It did not reveal any of this information to the investors of Gemini Earn, she added.
Genesis and Gemini have clashed several times over the past few months, including over ‘Gemini Earn’. Gemini is also the largest creditor of Genesis, which filed for bankruptcy protection in January.
Genesis and former CEO Soichiro Moro as well as DCG and its chief, Barry Silbert, have also been charged with trying to conceal more than $1.1 billion in losses.
© Thomson Reuters 2023
