In a stunning development, New York’s Attorney General, Letitia James, has launched a major lawsuit against crypto entities Gemini Trust, Genesis Global, and Digital Currency Group (DCG), alleging a billion-dollar fraud affecting 230,000 investors. Crypto journalist Colin Wu of Wu Blockchain highlighted the lawsuit, exposing claims that former Genesis CEO Soichiro “Michael” Moro and DCG’s Barry Silbert concealed Genesis’s financial status from the public and Gemini’s users.
New York Attorney General Letitia James announced Thursday that her office has charged Gemini Trust, Genesis Global and DCG for defrauding 230,000 investors out of more than $1 billion. The civil lawsuit also accuses former Genesis CEO and DCG founder Barry Silbert of attempting…
— Wu Blockchain (@WuBlockchain) October 19, 2023
According to a recent report, the lawsuit highlights parallels between the Gemini, Genesis, and DCG situation and the ongoing FTX and Alameda crisis. This involves soaring debts, poor risk management, and an attempt to conceal these problems. FTX and Alameda’s November bankruptcy filing set off a catastrophic chain of events, resulting in Genesis’s downfall. Consequently, the Gemini exchange, founded by the Winklevoss twins, halted customer withdrawals from their Earn program, a collaborative effort between the two companies.
The Securities and Exchange Commission (SEC) had taken legal action against Gemini and Genesis in January, asserting that their product constituted an unregistered securities offering. The lawsuit filed by the New York attorney general today further contends that Gemini deceived participants in the Earn program by consistently assuring them of its safety.
According to James’ office, internal analyses conducted by Gemini on Genesis revealed that the program carried inherent risks from its inception in February 2021 until its eventual termination in November 2022. James’ office is now aggressively pursuing restitution for the defrauded investors, including a minimum of 29,000 New Yorkers, and disgorgement of any ill-gotten gains. In a resolute statement, Attorney General Letitia James declared,
This fraud is yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry.
Gemini purportedly possessed knowledge that Genesis’ loans were inadequately secured and, at a critical juncture, recognized that a significant portion of its loans were concentrated in a single entity, Bankman-Fried’s Alameda Research. As the legal battle unfolds, James’ office is steadfast in its pursuit of justice, seeking restitution for the defrauded investors, including many New Yorkers, and the disgorgement of wrongfully acquired gains. The case is a stark reminder of the urgent need for increased regulation within the cryptocurrency sector.
