Gemini, Genesis And DCG Sued By New York Attorney General For Alleged $1 Billion Investor Fraud

Updated: 19 October 2023

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Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

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New York Attorney General Letitia James has filed a lawsuit against Gemini Trust Company, Genesis Global Capital, and Digital Currency Group (DCG), accusing them of defrauding investors of more than $1 billion.

About 230,000 investors, including 29,000 New Yorkers, were among the impacted investors, said the Office of the Attorney General (OAG) in an Oct. 19 statement.

“Thousands of investors lost millions of dollars and, in some instances, lost their life savings,” the statement said.

Attorney General James seeks to ban Gemini, Genesis, and DCG from the financial investment industry in New York, and also wants “restitution for investors and disgorgement of ill-gotten gains,” the statement added.

Gemini ”Lied” About Gemini Earn

It said its investigations found that Gemini lied to investors about an investment program it ran with Genesis called Gemini Earn.

“Gemini repeatedly assured investors that investing with Genesis through their Gemini Earn program was a low-risk investment,” it said. “However, OAG’s investigation found that Gemini’s internal analyses of Genesis showed that the company’s financials were risky. The lawsuit alleges that Gemini knew Genesis’ loans were undersecured and at one point highly concentrated with one entity, Sam Bankman-Fried’s Alameda, but did not reveal this information to investors.”

I'm suing cryptocurrency companies @Gemini, @GenesisTrading, and @DCGco for defrauding 230,000 investors out of more than $1 billion.

This is yet another example of the harms of an unregulated crypto industry.https://t.co/ysLVm8nujr

— NY AG James (@NewYorkStateAG) October 19, 2023

The lawsuit also charges Genesis, its former CEO Soichiro Moro, its parent company, DCG, and DCG’s CEO Barry Silbert with defrauding investors and the public by trying to conceal more than $1.1 billion in losses, which were borne by investors, it said.

“During the time that Genesis suffered these losses, Genesis, DCG, DCG’s CEO, Silbert, and Genesis’ CEO, Moro, conspired to falsely represent Genesis’ financial condition to the public and Gemini,” it said

“Two days after the Three Arrows Capital default, Genesis and DCG tweeted, ‘Despite continued heightened market volatility, the Genesis balance sheet is strong and our business is operating normally’,” it added.

My office is seeking to ban these companies from operating in New York and to get people their hard-earned money back.

Crypto companies have to play by the same rules as everyone else.

— NY AG James (@NewYorkStateAG) October 19, 2023

Stronger Regulations Needed

James highlighted the need for regulatory measures to protect investors in the cryptocurrency industry.

“This fraud is yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry,” she said. “My office will continue our efforts to stop deceptive cryptocurrency companies and push for stronger regulations to protect all investors.”

James has taken legal action against companies including KuCoin, Nexo, and the former CEO of Celsius.

The allegations come against the backdrop of Genesis’s significant losses, including a default by one of its largest borrowers, crypto hedge fund Three Arrows Capital.

This, combined with the troubles faced by Sam Bankman-Fried, co-founder of bankrupt crypto exchange FTX, who is on trial for fraud and conspiracy, adds to the complexity of the case.

Genesis and Gemini have also been charged by the U.S. Securities and Exchange Commission (SEC) for the unregistered offer and sale of securities to retail investors through Gemini Earn.