New York expands Digital Currency Group lawsuit to seek $3bn
New York Attorney General Letitia James has filed an amended lawsuit against crypto firm Gemini and Digital Currency Group, alleging that nearly quarter of a million investors were defrauded out of more than $3 billion, rather than the $1 billion claimed in the initial suit.
The first suit, filed in October, charged Genesis and its former CEO Soichiro Moro, its parent company, DCG, and DCG’s CEO Barry Silbert with defrauding investors and the public by trying to conceal more than $1.1 billion in losses, which were borne by investors.
The suit has been amended after more DCG investors came forward claiming they had been misled about the safety of their investments, says AG James.
“After months of false promises, we pulled the curtain back and revealed that DCG was lying to investors and defrauding them out of billions,” says Attorney General James. “The fraud and deceit were so expansive that many additional people have come forward to report similar harm.”
The suit relates to a failed partnership between Gemini and DCG unit Genesis on the former’s Earn interest-bearing product. In 2022, customer assets were frozen after Genesis halted withdrawals following the FTX collapse.
The suit alleges that Gemini lied to investors about Earn, repeatedly assuring customers that investing with Genesis through the programme was low-risk investment despite the fact that its own internal analyses showed that the company’s financials were risky.
The lawsuit alleges that Gemini knew Genesis’ loans were undersecured and at one point highly concentrated with one entity, Sam Bankman-Fried’s Alameda, but did not reveal this information to investors.
The AG says that after losing more than $1.1 billion on loan defaults, Genesis, DCG, and their executives tried to conceal their losses by entering into a $1.1 billion promissory note, in which DCG agreed to pay Genesis $1.1 billion in a decade at only a one percent interest rate.
The lawsuit states that DCG, through Genesis, used the promissory note as part of a scheme to defraud investors and the public about Genesis’ financial condition and its ability to operate its business.
