The New York Attorney General’s Office filed a lawsuit against Genesis Global Capital, Gemini Trust, and Digital Currency Group (DCG) this morning.
The complaint also includes allegations against Soichiro Michael Moro, former CEO of Genesis, and Barry E. Silbert, founder and CEO of DCG.
“These crypto companies lied to investors and tried to hide more than $1 billion in losses, and middle-class investors suffered as a result,” said Attorney General Letitia James. know in a statement .
Genesis Global Capital was a New York-based loan marketplace that went bankrupt in January. It was one of many Genesis entities.
Gemini is a cryptocurrency exchange run by Tyler and Cameron Winklevoss, while DCG is a large conglomerate focused on cryptocurrency, owning various assets in the industry, including Genesis, the first Cryptocurrency investor Grayscale and media outlet CoinDesk.
NYAG’s lawsuit alleges that these three entities defrauded 232,000 customers out of more than $1 billion.
This is said to have been accomplished through “two separate fraud schemes,” labeled throughout the lawsuit as the “Gemini Scheme” and the “DCG Scheme.”
NYAG alleges that Gemini’s scheme saw Gemini misrepresent Genesis Global’s creditworthiness when attracting users to its Earn program. Before pausing withdrawals last year, Gemini offered users a yield on their idle cryptocurrency through the program. To generate that profit, Gemini deposited those shares into Genesis Global.
“However, Gemini’s internal risk analyzes contradicted its assurances regarding Genesis Capital,” the complaint reads, stating that Gemini once downgraded Genesis’s credit rating from investment grade to junk. .
Earn users were also defrauded by the DCG Scheme after Genesis entities sought to hide “structural holes” at Genesis Capital worth more than $1 billion following the collapse of Three Arrows Capital – a hedge fund based The Singapore headquarters went bankrupt last year.
The Genesis entities, along with Moro, Silbert and DCG, were then accused of misrepresenting Genesis Capital’s financial condition.
The lawsuit comes amid a dispute between the Winklevoss twins and DCG CEO Barry Silbert over the amount of money owed.
In January, Gemini CEO and co-founder Cameron Winklevoss went so far as to ask Silbert to step down as CEO, declaring him “unfit” to run DCG.
Silbert countered that same day, calling the move designed to deflect blame from Cameron Winklevoss and Gemini themselves.
