New York Attorney General Letitia James filed a lawsuit against crypto companies Gemini Trust Company, Genesis Global Capital, and its parent company Digital Currency Group (DCG) for allegedly defrauding over 230,000 investors out of more than $1 billion. The lawsuit claims the companies lied about the risks of their lending program and tried to conceal over $1.1 billion in losses from investors.
Letitia James’ Crypto Fraud Lawsuit Seeks Over $1 Billion in Losses
The latest lawsuit from Letitia James centers around the investment program called “Gemini Earn” which was launched in February 2021 as a partnership between Gemini and Genesis. Gemini operates a crypto exchange and ostensibly touted Genesis as a trusted lending partner for the Gemini Earn program. The program allowed investors to earn interest by lending their crypto assets to Genesis.
However, the attorney general’s investigation found that Gemini misrepresented the risks of lending through Genesis and continued promoting the Earn program as “safe and secure” even after revising Genesis’ credit rating to junk status internally. The lawsuit states that Genesis tried to hide massive losses exceeding $1.1 billion from soured loans after the collapse of Three Arrows Capital (3AC) in June 2022.
“These cryptocurrency companies lied to investors and tried to hide more than a billion dollars in losses, and it was middle-class investors who suffered as a result,” James declared. “Hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn.”
The alleged fraud impacted over 230,000 investors globally, including at least 29,000 New York residents. The lawsuit highlights reported victims like a retired 73-year-old grandmother who lost her entire $199,000 life savings invested in Gemini Earn. Another New Yorker allegedly lost $20,500, nearly all his savings, after believing Gemini’s claims that the program was lower risk than other crypto lending options.
NY AG James is seeking to permanently ban the companies from offering securities or commodities in New York again. The lawsuit also aims to secure restitution for defrauded investors and disgorge any profits earned through the alleged fraud. The lawsuit represents the latest action James and her office have taken to crack down on the crypto industry amid growing concerns over consumer protection and potential misconduct. Earlier this year, she announced legislation to increase regulation of crypto assets in New York.
Her office has also obtained multiple settlements from unregistered cryptocurrency companies like Coinex and Coin Cafe. The attorney general contends that the alleged Gemini fraud points to ongoing risks posed by under-regulation in the cryptocurrency sector. Gemini responded to the lawsuit on the social media platform X.
“The NY AG’s lawsuit confirms what we’ve been saying all along — that Gemini, Earn users, and other creditors were the victims of a massive fraud and systematically ‘lied to’ by these parties about ‘Genesis’s financial condition,’” Gemini said. “With that said, we wholly disagree with the NY AG’s decision to also sue Gemini. Blaming a victim for being defrauded and lied to makes no sense and we look forward to defending ourselves against this inconsistent position.”
What do you think about Letitia James’ latest lawsuit against the three crypto giants? Share your thoughts and opinions about this subject in the comments section below.
