19-10-2023 (NEW YORK) Attorney General Letitia James of New York has filed a lawsuit against cryptocurrency firms Genesis Global, its parent company Digital Currency Group (DCG), and Gemini, accusing them of defrauding investors of over $1 billion.
This legal action highlights the ongoing challenges faced by the crypto industry, nearly a year after the bankruptcy of FTX, an exchange owned by Sam Bankman-Fried. The collapse of FTX caused a sector-wide upheaval that overwhelmed several prominent firms.
Through the lawsuit, Attorney General James aims to secure restitution for investors, seek disgorgement of ill-gotten gains, and impose a ban on all three cryptocurrency firms from engaging in financial investments in New York.
The focal point of the lawsuit revolves around a program called “Gemini Earn,” which Gemini operated in collaboration with Genesis. The program allowed customers to lend their crypto assets, such as bitcoin, to Genesis.
According to James, Gemini promoted the program as a “low-risk investment” despite internal analyses revealing that Genesis was financially precarious. Gemini allegedly knew that Genesis’ loans were undersecured and heavily concentrated with one entity, Alameda, the crypto hedge fund of Bankman-Fried, which later faced financial collapse.
James stated that Gemini failed to disclose this critical information to investors participating in Gemini Earn.
Gemini took to the messaging platform X, formerly known as Twitter, to express that the lawsuit “confirms what we’ve been saying all along.” However, the company disagreed with the decision to include Gemini in the legal action.
Genesis and Gemini have experienced multiple disputes in recent months, particularly concerning Gemini Earn. Furthermore, Gemini is the largest creditor of Genesis, which filed for bankruptcy protection in January.
At the time of reporting, DCG had not provided an immediate response to requests for comment.
