New York Attorney General Files $1.1Bn Lawsuit Against Crypto Giants

In a significant legal move, New York Attorney General Letitia James has taken legal action against three major cryptocurrency companies—Gemini, Genesis, and DCG—alleging colossal investor fraud exceeding $1 billion.

The lawsuit contends that these companies duped investors by presenting a misleading image of their crypto lending program, Gemini Earn.

Launched in February 2021, Gemini Earn, an initiative by the Winklevoss-founded crypto exchange Gemini, promised customers attractive interest rates for lending their crypto assets to Genesis, a crypto lender and trading platform. However, the lawsuit paints a vastly different picture.

According to the lawsuit, Gemini was well aware of Genesis’s dire financial straits, with losses exceeding $1.1 billion from a string of poor trades and defaults. Genesis, under the umbrella of DCG, a crypto conglomerate led by Barry Silbert, allegedly engaged in concealing these crippling losses, resorting to falsifying financial statements and manipulating accounting records. Regulators and auditors were also allegedly misled.

The lawsuit doesn’t spare Gemini either, accusing the exchange of failing to disclose the true extent of the risks tied to lending to Genesis. Reportedly, investors were not informed that their crypto assets were “undersecured,” exposing them to the risk of losing their principal in the event of a Genesis default. Moreover, Gemini did not reveal that Genesis had significantly lent its portfolio to a single entity, Alameda Research, a crypto trading firm led by Sam Bankman-Fried.

New York Attorney General Says 29,000 New Yorkers Were Affected

The consequences of these alleged deceptive practices were devastating. Over 230,000 investors, including 29,000 New Yorkers, suffered losses exceeding $1 billion in Gemini Earn, leading to some losing their life savings. Attorney General James is pursuing a two-fold approach: a ban on Gemini, Genesis, and DCG from the financial investment sector in New York and restitution for victims, along with disgorgement of ill-gotten gains.

This legal action forms part of Attorney General James’s broader mission to safeguard investors and consumers from fraud and misconduct within the cryptocurrency realm. The cryptocurrency industry, despite its promise and potential, remains a hotbed of regulatory scrutiny and legal action, with consequences that ripple across both Wall Street and Main Street. Stay tuned as this case unfolds, potentially reshaping the cryptocurrency landscape in the United States.

 

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