Letitia James, the attorney general of New York NY), tripled the amount of the alleged fraud scheme of Digital Currency Group along with other cryptocurrency defendants in her lawsuit on Friday, bringing it to over $3 billion. In October, James filed a lawsuit against Gemini Trust, the exchange managed by twins Cameron and Tyler Winklevoss, and DCG, its Genesis Global Capital division.
She asserted that by misrepresenting the Gemini Earn program—which allowed users to lend digital currencies to Genesis as payment for an increased rate of return—they caused investors to lose more than $1 billion.
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As additional investors came forward, according to the attorney general, it became evident that “the scam committed by DCG through Genesis” also deceived investors who delivered money right away to Genesis under the false pretense that their funds were secure. As per the complaint, a significant number of the extra investors were ordinary clients, such as a father staying at home and a chiropractor who invested $2 million in bitcoin with Genesis.
In order to compensate the over 230,000 investors she feels were duped, James is requesting more than $3 billion. “More proof that stricter cryptocurrency laws are required to safeguard all investors comes from this illicit cryptocurrency scheme and the terrible financial losses that actual people have experienced,” James stated in a statement.
James’ lawsuit, according to DCG, is “baseless,” and the company anticipates winning in court. It released a statement stating, “DCG as well as Barry Silbert are going to be fully vindicated. DCG has always carried out its business legally and with integrity.” After declaring bankruptcy in January 2023, Genesis is closing.
Representatives for DCG and Gemini did not immediately respond to requests for comment. Barry Silbert, who is DCG’s chief executive, and Soichiro Moro, a former Genesis chief executive, are also defendants.
Genesis 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 bypassed disclosure requirements meant to protect Gemini Earn customers.
Last week, Genesis agreed to pay the SEC a $21 million fine, also contingent on its repaying customers first. Requests for comment from DCG and Gemini representatives were not immediately answered. Two other defendants are Soichiro Moro, the former CEO of Genesis, and Barry Silbert, the CEO of DCG. Two months after Sam Bankman-Fried’s FTX cryptocurrency exchange collapsed and Gemini Earn customers’ withdrawals were stopped, Genesis filed for bankruptcy.
The SEC of the United States also filed lawsuits against Genesis and Gemini, claiming that they disregarded disclosure obligations designed to safeguard Gemini Earn clients. Genesis consented last week to reimburse the SEC $21 million, subject to Genesis’s first paying back its customers. Gemini has filed a lawsuit against DCG due to the dissolution of their cryptocurrency lending alliance.
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