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NY AG Escalates DCG Lawsuit to $3 Billion, Uncovers Wider Fraud

Last Updated February 12, 2024 4:07 PM
Teuta Franjkovic
Last Updated February 12, 2024 4:07 PM

Key Takeaways

  • NY AG Letitia James accuses DCG, Genesis, and Gemini of a crypto fraud scheme.
  • The alleged fraud involved not only the Gemini Earn program but also direct investments with Genesis.
  • Facing bankruptcy and the lawsuit, Genesis agrees to repay defrauded customers through a settlement with the AG.

New York Attorney General Letitia James has expanded her lawsuit  against Digital Currency Group (DCG) and its affiliates, including the lending platform Genesis and the crypto exchange Gemini, to allege a fraud scheme that now reportedly involves over $3 billion in investor losses.

This amplification from an initial claim of around $1 billion comes after more investors came forward  with allegations of being misled by the defendants.

James Targets DCG, Genesis, and Gemini in Fraud Lawsuit

In October, New York Attorney General Letitia James initiated legal action against Digital Currency Group (DCG), its subsidiary Genesis Global Capital, and the Gemini Trust exchange, operated by Cameron and Tyler Winklevoss. The lawsuit alleges that these entities were responsible for misleading investors, leading to over $1 billion in losses through the Gemini Earn program.

This program promised investors high returns in exchange for lending their crypto assets to Genesis. As more affected investors raised their complaints , it was revealed that the deceptive practices extended beyond the Gemini Earn program.

Direct investments with Genesis also caught investors in the web of deceit, with assurances of safety for their investments proving false. Among those impacted are individuals from various walks of life, including a chiropractor and a stay-at-home dad, each of whom invested $2 million in Bitcoin with Genesis, highlighting the broad reach and serious impact of the alleged fraud.

Seeking Over $3 Billion in Restitution for 230,000+ Investors

Attorney General Letitia James is advocating for more than $3 billion in restitution on behalf of over 230,000 investors, citing a significant fraudulent cryptocurrency operation that resulted in substantial financial losses. James emphasized  the need for stricter cryptocurrency regulations to safeguard investors, highlighting the real-world impacts of such schemes.

Digital Currency Group (DCG) has dismissed the lawsuit  as “baseless,” expressing confidence in a favorable legal outcome.

“DCG has always conducted its business lawfully and with integrity, and DCG and Barry Silbert will be fully vindicated,” it said  in a statement.

Genesis Shuts Down After Bankruptcy, AG Settlement

Genesis is finalizing its operations after declaring bankruptcy in January 2023. In a recent development, the company has agreed to a settlement , committing to address fraud claims by ensuring full repayment to customers within the Chapter 11 bankruptcy framework.

This settlement is pending approval from a bankruptcy judge. The collapse of FTX, led by Sam Bankman-Fried, precipitated Genesis’s bankruptcy two months after it ceased withdrawals for Gemini Earn clients. DCG’s CEO Barry Silbert and former Genesis CEO Soichiro Moro are named defendants in the case. As of now, there has been no response from representatives of DCG and Gemini regarding this settlement.

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