New York Attorney General Files Lawsuit Against Gemini and DCG for Investor Fraud

Published 7 months ago

Crypto firm Gemini and Digital Currency Group (DCG) are facing a lawsuit from New York Attorney General Letitia James. The suit alleges that the two companies defrauded nearly a quarter of a million investors out of more than $1 billion.

The Genesis of the Lawsuit

The legal action stems from a failed partnership between Gemini and a unit of DCG, Genesis, related to Gemini’s Earn interest-bearing product. In the previous year, customer assets were frozen after Genesis halted withdrawals in the wake of the FTX collapse.

Allegations Against Gemini and DCG

The lawsuit claims that Gemini deceived investors about the Earn product, continually assuring customers that investing with Genesis through the program was a low-risk move, despite internal analyses indicating otherwise.

Further allegations suggest that Gemini was aware that Genesis’ loans were undersecured and, at times, heavily concentrated with one entity, Alameda, managed by Sam Bankman-Fried. However, this critical information was allegedly not disclosed to investors.

Charges Against Genesis, DCG, and their CEOs

Genesis, its former CEO Soichiro Moro, parent company DCG, and DCG’s CEO Barry Silbert stand accused of defrauding both investors and the public. They allegedly tried to hide more than $1.1 billion in losses, which were ultimately suffered by the investors.

Attorney General’s Pursuit for Justice

Attorney General James is aiming to ban Gemini, Genesis, and DCG from the financial investment industry in New York. She is also seeking restitution for investors and the disgorgement of ill-gotten gains.

James stated that hardworking investors nationwide lost over a billion dollars due to being misled about the safety and growth potential of their investments in Gemini Earn. The lawsuit alleges that Gemini concealed the risks of investing with Genesis, while Genesis supposedly lied about its losses.

Earlier this year, the SEC charged both Genesis and Gemini with offering and selling unregistered securities via the Earn product, which was discontinued the same month.

Since then, Gemini has launched a lawsuit against DCG and Silbert, accusing them of “fraud and deception” and seeking recovery of “damages and losses” tied to the partnership. Meanwhile, Genesis, which has filed for bankruptcy, has sued parent company DCG in an attempt to recover $620 million in outstanding loans.