New York Attorney General Letitia James has initiated a lawsuit against cryptocurrency firms Gemini Trust, Genesis Global Capital, and Digital Currency Group (DCG).
The lawsuit alleges that these companies defrauded over 230,000 investors, including at least 29,000 New Yorkers, out of more than $1 billion. James seeks to ban these firms from the financial investment industry in New York.
Gemini’s Involvement with Genesis
Gemini lent funds to Genesis as part of its Earn program. Genesis, owned by DCG, subsequently lent these funds to counterparties, including trading firms Three Arrows Capital and Alameda Research, both of which eventually went bankrupt. This chain of events left Genesis with a substantial $1.1 billion deficit.
The defendants are alleged to have disguised $1.1 billion in losses through a campaign of misstatements, omissions, and concealment, primarily using a promissory note. The suit highlights that tweets sent by Genesis and DCG following the default of Three Arrows Capital contained false and misleading information.
Ongoing Efforts to Regulate the Cryptocurrency Industry
This lawsuit follows her recent actions against other crypto players, including CoinEx, KuCoin, and Celsius founder Alex Mashinsky. It is part of a broader effort to enforce stronger regulations in the cryptocurrency space.
Background on Related Cases
The lawsuit coincides with the trial of Sam Bankman-Fried, who is also facing allegations of failing to provide audited financial statements to companies like Paradigm, BlockFi, and Genesis before receiving investments or loans.
These companies had invested substantial sums in Bankman-Fried’s enterprises, including the crypto exchange FTX, its U.S. arm, and Alameda.
Bankruptcy and Previous Legal Actions
In addition, Genesis Global Capital filed for bankruptcy in January, and Gemini had sued DCG and Barry Silbert in July, leading to a dispute over allegations of defamation.
Responses from the Parties
Spokespeople for DCG, Gemini, and Genesis also did not immediately respond to requests for comment. However, Gemini expressed its disagreement with the lawsuit on social media platform X (formerly Twitter). It vowed to defend itself against the allegations, arguing that they should not be held responsible for being defrauded and misled.
In conclusion, the lawsuit brought by the New York Attorney General also reflects ongoing efforts to regulate the cryptocurrency industry and protect the interests of investors. Moreover, it underscores the need for transparency and accountability in the rapidly evolving world of digital assets.