By Keith Griffiths for Dailymail.com and Reuters
22:11 09 February 2024, updated 22:28 09 February 2024
- James on Friday expanded her lawsuit against cryptocurrency companies Genesis and Gemini
- It is seeking $3 billion in compensation for more than 230,000 investors
- The cryptocurrency lending scheme was allegedly falsely described as safe for investors
New York Attorney General Letitia James on Friday expanded her lawsuit against cryptocurrency companies Genesis and Gemini, tripling the size of the alleged fraud scheme to more than $3 billion.
The amended complaint expands on a lawsuit James filed in October against Digitalency Group, its Genesis Global Capital unit, and Gemini Trust, the exchange run by twin brothers Cameron and Tyler Winklevoss.
It alleged that they caused losses of more than $1 billion by misleading investors about the Gemini Earn program, which allows customers to lend crypto assets to Genesis in exchange for a high rate of return.
As more investors came forward, it became clear that “the fraud committed by DCG through Genesis” also ensnared investors who sent money directly to Genesis and were falsely assured that their money was safe, the prosecutor said.
Several additional investors were small retail clients, including a chiropractor and a stay-at-home father who each invested $2 million in bitcoin with Genesis, the complaint said.
James is seeking more than $3 billion in compensation for more than 230,000 investors who she believes were defrauded.
“This illegal cryptocurrency scheme, and the horrific financial losses real people have suffered, are another reminder of why stronger cryptocurrency regulations are needed to protect all investors,” James said in a statement.
Also accused are Barry Silbert, CEO of DCG, and Soichiro Moro, former CEO of Genesis.
A DCG spokesperson told DailyMail.com in a statement: “There is nothing new here. This is the same baseless complaint that has been recirculated to generate another round of headlines.”
We will fight the claims vigorously and we will win. DCG has always conducted its business lawfully and fairly, and DCG and Barry Silbert will be fully vindicated.
Genesis will close after filing for bankruptcy in January 2023.
James alleged that Gemini, run by the Winklevoss twins known for their legal battles with Meta founder Mark Zuckerberg, described Earn as “low risk” even as its internal analyzes found Genesis was on risky financial footing.
Genesis pooled the money into large loans to major crypto players — including at one point a nearly $2 billion loan to Alameda Research, the hedge fund affiliated with disgraced FTX founder Sam Bankman-Fried.
Although the Alameda loan was taken down before the FTX collapse sent shockwaves through the cryptocurrency industry, James claims it was one of the risky, unsecured loans that Gemini and Genesis hid from Earn investors.
Days after FTX collapsed in November 2022, Genesis suspended withdrawals, owing at least $1 billion to more than 232,000 investors, including at least 29,000 New Yorkers, according to the new lawsuit.
Late Thursday, it reached a settlement with James' office, agreeing to pay its fraud claims as long as it repays clients in full through the Chapter 11 process. That settlement requires approval from a bankruptcy judge.
Genesis has filed for bankruptcy two months after halting withdrawals by Gemini Earn customers following the collapse of Sam Bankman-Fried's FTX cryptocurrency exchange.
Both Genesis and Gemini were also sued by the U.S. Securities and Exchange Commission, which said they exceeded disclosure requirements meant to protect Gemini Earn customers.
Last week, Genesis agreed to pay a $21 million fine to the Securities and Exchange Commission, on the condition that it repay its customers first.
Meanwhile, Gemini has filed a lawsuit against DCG over its failure in its cryptocurrency lending partnership.
