In a bold move, New York Attorney General Letitia James has tripled the stakes in her ongoing lawsuit against cryptocurrency companies Gemini, Genesis Global Capital, and Digital Currency Group (DCG). The amended complaint filed last Friday seeks a staggering $3 billion, triple the initial fraud claims.
First, in October, James sued the companies for $1.1 billion, citing fraudulent activities. However, since then, the prosecutor confirms, more victims have come forward, uncovering a more complex web of deception.
Gemini's misleading assertions
At the heart of the matter lies Gemini, the cryptocurrency exchange founded by the Winklevoss twins. The amended complaint accuses Gemini of defrauding investors through a program called Gemini Earn, which is conducted in cooperation with Genesis. The lawsuit claims that Gemini assured investors that their money was safe, but the reality was far from that.
The lawsuit asserts that Genesis' loans, intricately linked to FTX founder Sam Bankman-Fried's cryptocurrency hedge fund, were far riskier than Gemini let on. Shockingly, Gemini allegedly knew about these risks but chose not to disclose them to investors.
Read also: Genesis Global settles US$21 million dispute with SEC over Gemini earnings
Losses are increasing
As more victims emerged, the prosecutor asserts that false assurances about the safety of the funds translated into additional losses totaling a staggering $2 billion. The alleged fraud has so far affected more than 230,000 investors, resulting in cumulative losses exceeding $3 billion.
The lawsuit doesn't just target Gemini; It also features former Genesis CEO Soichiro Moro and DCG founder and CEO Barry Silbert.
DCG response
The DCG strongly rejected the lawsuit as baseless, expressing confidence in the court's victory. Meanwhile, Genesis, which declared bankruptcy in January 2023, reached a settlement with the New York Attorney General's Office. However, this settlement is contingent on customers being fully repaid through the Chapter 11 bankruptcy process, pending approval by a bankruptcy judge.
Read also: FTX plans to sell $175 million claim against Genesis to repay customers
The storm is brewing: can regulation help us?
Both Genesis and Gemini are also facing legal challenges from the US Securities and Exchange Commission (SEC). The regulator claims it exceeded disclosure requirements meant to protect Gemini Earn customers. While Genesis recently agreed to a $21 million fine with the SEC, Gemini is embroiled in a legal tussle with DCG over issues related to their cryptocurrency lending partnership.
New York's Attorney General stresses the urgent need for stronger cryptocurrency regulations. It is a crucial requirement for safeguards to protect investors' interests and can no longer be ignored.
