New York Attorney General slaps crypto titans Gemini, Genesis, and DCG with fraud suit

New York’s Attorney-General, Letitia James, has launched a $1.1 billion lawsuit against crypto powerhouses Gemini Trust, Genesis Global Capital, and Digital Currency Group (DCG).

In an already tense atmosphere surrounding Sam Bankman-Fried, the crypto world is facing a legal tempest as the three companies are accused of a colossal web of deceit.

Fallout largely triggered by Alameda Research

The lawsuit revolves around “Gemini Earn,” a program that sold itself as a secure way for crypto enthusiasts to earn up to 8 percent interest on their digital assets. It promised to be the future of savings accounts. But, James’ lawsuit alleges that this initiative was a ticking time bomb, a far riskier venture than they let on.

The lawsuit claimed that the loans from Genesis were high-risk and heavily concentrated among a select few third parties, notably Alameda Research, which constituted a whopping 60 percent of Genesis’ loan book. The fallout was as expected.

Also read: False ETF news sparks $85 million liquidation, triggers SEC warning

When Genesis crashed in the wake of the FTX crisis in November 2022 and subsequently declared bankruptcy, Gemini Earn investors were left high and dry, with almost $900 million locked away.

While the SEC had previously targeted Genesis and Gemini over the Gemini Earn program, claiming it amounted to an unregistered securities offering, this lawsuit’s scope is far broader.

Investors not informed of inherent risks

Gemini faces accusations of failing to warn customers about the inherent risks. Meanwhile, Genesis and DCG stand accused of failing to vet the quality of their loans and trying to cover up massive losses they suffered in 2022. DCG’s CEO, Barry Silbert, and Genesis’ CEO, Michael Moro, both defendants in the suit, are accused of misleading the public about Genesis’ financial health.

In line with the lawsuit, Letitia James, the New York Attorney-General, did not hold back in her statement: “These cryptocurrency companies lied to investors and tried to hide more than a billion dollars in losses.”

Middle-class investors are the ones left holding the bag after believing their money was secure in Gemini Earn.

While Gemini chose not to comment immediately, they did release a statement on X declaring their readiness to fight back. Genesis and DCG, however, have remained silent on the matter.

Also read: Sam Bankman-Fried accused of fraud and money laundering by former girlfriend

This lawsuit is part of a growing trend of regulatory scrutiny and enforcement in the cryptocurrency sector. It could even have implications beyond the three companies involved, potentially delaying the long-anticipated approval of a bitcoin exchange-traded fund (ETF).

A host of firms, including DCG subsidiary Grayscale, is eagerly awaiting ETF approval, but these charges could cast a shadow on the process.

Image credit: wirestock via freepik


Bal M

Bal was BTW's copywriter specialising in tech and productivity tools. He has experience working in startups, mid-size tech companies, and non-profits.

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