New York Attorney General Letitia James has taken legal action against three prominent cryptocurrency companies – Gemini Trust Company, Genesis Global Capital, and Digital Currency Group (DCG) – for allegedly defrauding investors of over $1 billion. The lawsuit, filed on Thursday, also implicates Genesis former CEO Soichiro “Michael” Moro and DCG’s founder and CEO Barry Silbert for their involvement in hiding $1.1 billion in losses and deceiving investors.
Key Takeaway
New York Attorney General Letitia James has filed a lawsuit against Gemini Trust Company, Genesis Global Capital, and Digital Currency Group for allegedly defrauding investors of over
billion. The lawsuit sheds light on deceptive practices within the cryptocurrency industry and aims to hold these companies accountable for their alleged fraudulent actions.
Allegations and Impact on Investors
The lawsuit accuses the three companies of perpetrating fraud and highlights the negative effects on approximately 230,000 investors. The investigation claims that Gemini deceived investors by misrepresenting its investment program, Gemini Earn, as a “low-risk investment,” despite evidence to the contrary.
Furthermore, the lawsuit alleges that Gemini knew about Genesis’ undersecured loans and their concentration with one entity, Sam Bankman-Fried’s Alameda, but failed to disclose this information to investors. This omission potentially contributed to the financial harm caused.
Under-Regulation and Cryptocurrency Industry
New York Attorney General Letitia James emphasized that this case is another example of the detrimental impact that bad actors within the under-regulated cryptocurrency industry can have on unsuspecting investors. The lawsuit aims to hold these companies accountable for their alleged fraudulent practices.
Genesis’ Troubles and Legal Consequences
The allegations come at a significant time, as Sam Bankman-Fried, co-founder of crypto exchange FTX and Alameda Research, is currently facing trials related to fraud and money laundering. FTX and Alameda filed for bankruptcy in November, causing market turmoil that ultimately led to Genesis’ downfall. Genesis itself filed for bankruptcy in January after experiencing losses of over $100 million from borrowers Three Arrows Capital and Babel Finance.
SEC Charges and Unregistered Securities Sale
Prior to the recent lawsuit, the U.S. Securities and Exchange Commission (SEC) charged Genesis and cryptocurrency exchange Gemini for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program. The SEC alleges that these companies raised billions of dollars’ worth of cryptocurrency assets from hundreds of thousands of investors.
