New York Attorney General Letitia James has filed a lawsuit against three cryptocurrency firms, Gemini, Genesis, and Digital Currency Group (DCG), for allegedly defrauding investors of more than $1 billion through a deceptive investment program.
According to the lawsuit, Gemini, a crypto exchange founded by the Winklevoss twins, launched Gemini Earn in February 2023, a program that promised investors high returns on their crypto deposits. Gemini claimed that the program was low-risk and secure and that it partnered with Genesis, a crypto lending platform, to lend out the deposited funds to vetted borrowers.
However, the lawsuit alleges that Gemini and Genesis lied to investors about the true nature and risks of the program. The lawsuit claims that Genesis’ loans were unsecured and highly concentrated with one entity, Alameda Research, a crypto trading firm run by Sam Bankman-Fried.
Crypto Firms Hit Hard by NY Authorities
The lawsuit also accuses Genesis and its former CEO Soichiro Moro, as well as DCG and its CEO Barry Silbert, of concealing more than $1.1 billion in losses from investors.
The lawsuit seeks to ban Gemini, Genesis, and DCG from operating in the financial investment industry in New York, as well as to recover the lost funds and impose penalties for their misconduct. The lawsuit also warns the public about the dangers of investing in the unregulated and volatile cryptocurrency market.
“Hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn,” James said in a statement.
“Gemini hid the risks of investing with Genesis, while Genesis lied to the public about its losses. This is another example of bad actors causing harm throughout the under-regulated cryptocurrency industry.”
In January 2023, Genesis and Gemini found themselves in legal trouble when the United States Securities and Exchange Commission (SEC) filed a lawsuit against them. The SEC alleged that these companies were offering unregistered securities through their Earn program.