Letitia James, the attorney general of New York (NYAG), filed a lawsuit today against the cryptocurrency companies Gemini Trust Co. (Gemini), Genesis Global Capital, a trading firm, and Digital Currency Group (DCG), a conglomerate, for allegedly defrauding over 230,000 investors—of which at least 29,000 are residents of New York—of over $1 billion.The NYAG is attempting to bar Gemini, Genesis, and DCG from operating in the New York financial investment market.
Gemini, as part of its Earn program, lent money to DCG-owned Genesis.Subsequently, the money was lent to counterparties such the trading companies Alameda Research and Three Arrows Capital, both of which filed for bankruptcy.Genesis now has a $1.1 billion deficit as a result.
“Today’s lawsuit is the latest action taken by Attorney General James to rein in the cryptocurrency industry and protect investors,” the statement said, citing recent action against crypto players CoinEx, KuCoin, and Celsius founder Alex Mashinsky.
The lawsuit claims that Gemini concealed from investors the fact that it was aware that Genesis’ loans were poorly secured and, at one point, heavily concentrated with Sam Bankman-Fried’s trading company Alameda.In addition, the NYAG accused Genesis and its former CEO, Soichiro Moro, and DCG and its CEO, Barry Silbert, of misleading investors and the public by attempting to hide losses totaling over $1.1 billion that investors had to bear.They “disguised $1.1 billion in losses through a months-long campaign of misstatements, omissions, and concealment” by way of a promissory note, according to the suit.
“The tweets were false, misleading, and omitted material facts. DCG did not simply ‘assume’ the $1.1 billion, open-term liability related to Three Arrows, which could be called at any time; it replaced that liability with an illiquid ten-year Promissory Note,” the NYAG complaint stated.
“My office will continue our efforts to stop deceptive cryptocurrency companies and push for stronger regulations to protect all investors,” James said.