In a bold move, New York State Attorney General Letitia James has tripled the stakes in her ongoing lawsuit against crypto companies Gemini, Genesis Global Capital, and Digital Currency Group (DCG). The amended complaint filed last Friday seeks a staggering $3 billion, triple the original fraud claims.
James originally filed a $1.1 billion lawsuit against both companies in October, alleging fraud. But since then, more victims have come forward, revealing an even more complex web of deception, the attorney general claims.
Gemini's misleading guarantee
At the center of the issue is Gemini, a cryptocurrency exchange founded by the Winklevoss twins. The amended complaint accuses Gemini of defrauding investors through a program called “Gemini Earn” run in conjunction with Genesis. The lawsuit alleges that while Gemini assured investors that their funds were safe, the reality was far from that.
The lawsuit alleges that Genesis' loans were intricately tied to FTX founder Sam Bankman Fried's crypto hedge fund and were far riskier than Gemini admits. Shockingly, Gemini was reportedly aware of this risk, but he chose not to disclose it to investors.
Also read: Genesis Global settles SEC dispute over Gemini revenue for $21 million
Losses are growing
As more victims surface, the attorney general claims false assurances about the safety of the funds resulted in additional losses totaling a staggering $2 billion. The alleged fraud currently affects more than 230,000 investors, with cumulative losses exceeding $3 billion.
This lawsuit doesn't just target Gemini. Also included are former Genesis CEO Soichiro Moro and his DCG founder and CEO Barry Silverbart.
DCG response
DCG vehemently dismissed the lawsuit as baseless and expressed confidence that it would prevail in court. Meanwhile, Genesis, which filed for bankruptcy in January 2023, reached a settlement with the New York Attorney General's Office. However, the settlement is subject to bankruptcy judge approval and is subject to full repayment to customers through Chapter 11 bankruptcy proceedings.
Also read: FTX plans to sell $175 million in claims against Genesis to repay customers
A storm is brewing: can regulation help us?
Both Genesis and Gemini are also grappling with legal challenges from the U.S. Securities and Exchange Commission (SEC). Regulators allege that Gemini Earn circumvented disclosure requirements meant to protect its customers. Genesis recently agreed to a $21 million fine with the SEC, while Gemini is embroiled in a legal battle with DCG over issues related to its crypto lending partnership.
The New York State Attorney General has emphasized the urgent need for stronger cryptocurrency regulation. This is an important call for safeguards to protect investor interests and can no longer be ignored.
