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New York AG targets crypto firms in major fraud suit over $1B loss

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  • Staff Report 

State Attorney General Letitia James has filed a lawsuit against three major cryptocurrency entities: the Gemini Trust Company, Genesis Global Capital, LLC, along with its affiliates, and the Digital Currency Group, Inc. (DCG). The suit alleges these firms defrauded over 230,000 investors, including approximately 29,000 New Yorkers, out of more than $1 billion. Central to the accusations is the “Gemini Earn” program, in which James contends Gemini misled investors about its partnership with Genesis, painting it as a low-risk venture despite knowing of significant underlying risks.

Gemini, a prominent New York digital asset platform, introduced the “Gemini Earn” initiative in February 2021. However, by November 2022, internal analyses depicted its loan book as precarious. James highlights that at one stage, nearly 60% of all Genesis loans to third-party entities were concentrated with Alameda. In another revelation, despite downgrading Genesis’s credit rating from investment grade to junk in February 2022, Gemini did not disclose this change and persisted in promoting “Gemini Earn” as a minimal risk venture.

The lawsuit also delves into concealment efforts, claiming Genesis and DCG obscured true financial states. A significant point of contention is a $1.1 billion promissory note between DCG and Genesis, seen as a mechanism to mask the extent of financial duress and mislead both Gemini Earn investors and the general public. In response to the growing concerns in the virtual asset sector, James urged deceived New Yorkers and industry insiders witnessing malpractice to come forward.

Categories: New York StateNews