February 25, 2024
Crypto

New York Expands Lawsuit Against Gemini And DCG—Claiming $3 Billion In Alleged Crypto Fraud Scheme


Topline

New York expanded its complaint against Gemini and Digital Currency Group on Friday, alleging both cryptocurrency firms defrauded thousands of investors of an additional $2 billion, after Attorney General Letitia James filed a lawsuit against the companies late last year seeking more than $1 billion in restitution.

Key Facts

The revised complaint now includes more than 230,000 investors who claim they were defrauded by Gemini—run by billionaire twins Cameron and Tyler Winklevoss—and Genesis, DCG’s bankrupt crypto lending arm, after they failed to disclose risks associated with the crypto investing program Gemini Earn, James said Friday.

Thousands of additional investors have come forward to share their losses since the state filed a complaint in October, according to James, who is now seeking more than $3 billion in total restitution from both companies.

While the initial lawsuit focused on losses associated with the Gemini Earn program, the revised complaint includes additional losses by investors who contributed money directly to Genesis, James added.

An investigation by the New York Attorney General’s office determined Gemini allegedly reassured investors there were few risks by investing in Gemini Earn, despite internal analysis suggesting otherwise.

DCG chief executive Barry Silbert and former Genesis CEO Michael Moro are also named as defendants.

DCG did not immediately respond to a request for comment from Forbes.

Chief Critic

Gemini responded to the initial complaint by claiming the company’s inclusion in the suit is “blaming a victim for being defrauded and lied to.” Gemini sued DCG in July, alleging the company and Silbert committed accounting fraud while both “embarked on a carefully crafted campaign of lies” to hide liquidity challenges at Genesis.

Tangent

Genesis is still named in the complaint even though it settled its lawsuit with James on Thursday, after the company filed a bankruptcy restructuring plan that would return assets to former Gemini Earn investors and other Genesis creditors. The company also agreed to liquidate its assets and cease operations in New York. DCG condemned the plan, suggesting it would give customers “additional payouts” that exceed their claims. A bankruptcy judge will review the plan Wednesday, though it was not immediately clear how the revised complaint will impact Genesis’ settlement with the state.

Key Background

James filed a lawsuit against DCG and Gemini in October after an investigation determined Gemini lied to investors about the Gemini Earn program. Interest rates up to nearly 8% were advertised through the Gemini Earn program, which operated for just over one year. The program’s assets collapsed last year after several cryptocurrency firms filed for bankruptcy, including FTX and Three Arrows Capital. The Securities and Exchange Commission also sued Gemini and Genesis in January for allegedly selling unregistered securities through the program.

Forbes Valuation

Cameron and Tyler Winklevoss are each worth $1.4 billion, according to our latest estimates. Silbert had a net worth of $3.2 billion in 2022, though he later fell off of Forbes’ billionaire rankings amid rising debts at DCG.

Further Reading

New York Sues Wiklevoss’ Gemini And Silbert’s DCG Alleging $1 Billion Crypto Fraud Scheme (Forbes)





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