The Attorney General of New York, Letitia James, has initiated legal proceedings against Gemini Trust Company, Genesis Global Capital, and their parent organization, Digital Currency Group (DCG). The lawsuit alleges that these cryptocurrency entities have defrauded more than 230,000 investors, costing them in excess of $1 billion. The legal complaint argues that these firms misled investors about the risk profile of their lending program and concealed financial losses exceeding $1.1 billion.
Letitia James Aims to Recover Over $1 Billion through Crypto Fraud Lawsuit
This recent legal action by Attorney General James focuses on an investment initiative known as “Gemini Earn,” launched in February 2021 through a collaboration between Gemini and Genesis. Operating as a cryptocurrency exchange, Gemini publicly endorsed Genesis as a reliable lending partner for the Gemini Earn initiative. The scheme permitted investors to accrue interest by lending their cryptocurrency assets to Genesis.
However, the findings of the attorney general’s inquiry indicate that Gemini provided misleading information about the risk involved in lending via Genesis. Furthermore, even after internally downgrading Genesis’s credit status to “junk,” Gemini persisted in advertising the Earn program as a “safe and secure” investment opportunity. The legal complaint suggests that Genesis sought to conceal enormous losses totaling over $1.1 billion, losses that accrued after the implosion of Three Arrows Capital (3AC) in June 2022.
“Middle-class investors bore the brunt of over a billion dollars in losses due to the deceptive practices of these cryptocurrency firms,” stated James. “Ordinary investors, including many New Yorkers and individuals nationwide, were misled into believing their investments would be secure and grow through the Gemini Earn program.”
More than 230,000 global investors were affected by the purported fraud, including at least 29,000 residents of New York. Notable victims cited in the lawsuit include a 73-year-old retiree who lost her entire life savings of $199,000 invested in Gemini Earn, and another New York resident who saw a loss of $20,500—virtually his entire savings—due to his belief in the program’s touted low-risk nature.
The attorney general’s legal action aims to indefinitely bar these companies from offering securities or commodities within New York. In addition, the lawsuit seeks restitution for the aggrieved investors and the forfeiture of any profits generated through the alleged fraudulent activities. This lawsuit is the latest effort by James and her office to impose stricter regulatory oversight on the cryptocurrency sector, in light of growing concerns over consumer protection and ethical conduct. Earlier this year, increased regulation of crypto assets in New York was announced by her office, which has also secured various settlements from non-compliant cryptocurrency firms such as Coinex and Coin Cafe.
In response to the lawsuit, Gemini issued a statement through social media platform X, asserting its own victimization. “The lawsuit by the NY Attorney General corroborates our long-standing claim that not just Gemini but also its Earn users and other creditors were systematically deceived about Genesis’s financial stability,” Gemini stated. “We fundamentally disagree with the attorney general’s decision to include us in this lawsuit. It is illogical to blame a victim for being misled and defrauded, and we are prepared to vigorously defend against this incongruent stance.”
Feel free to share your perspectives on Attorney General Letitia James’s recent legal action against these cryptocurrency titans in the comments section below.
Frequently Asked Questions (FAQs) about Gemini lawsuit
What is the lawsuit filed by NY Attorney General Letitia James about?
The lawsuit alleges that cryptocurrency firms Gemini Trust Company, Genesis Global Capital, and their parent organization, Digital Currency Group (DCG), defrauded more than 230,000 investors out of over $1 billion. It claims these companies misled investors about the risks associated with their lending program called “Gemini Earn” and attempted to conceal financial losses exceeding $1.1 billion.
Who are the entities involved in the lawsuit?
The entities involved are the New York Attorney General Letitia James, Gemini Trust Company, Genesis Global Capital, and Digital Currency Group (DCG).
What is the “Gemini Earn” program?
The “Gemini Earn” program is an investment initiative launched in February 2021 as a collaboration between Gemini and Genesis. It allows investors to earn interest by lending their cryptocurrency assets to Genesis.
How did the companies allegedly mislead investors?
The lawsuit contends that Gemini and Genesis provided misleading information about the risks involved in the lending program. Even after internally downgrading Genesis’s credit rating to “junk,” the companies continued to promote the “Gemini Earn” program as “safe and secure.”
What losses are cited in the lawsuit?
The legal complaint suggests that the companies attempted to conceal losses totaling over $1.1 billion that accrued following the collapse of Three Arrows Capital (3AC) in June 2022.
Who are the victims mentioned in the lawsuit?
The lawsuit alleges that over 230,000 global investors were defrauded, including at least 29,000 residents of New York. Notable victims include a 73-year-old retiree who lost her life savings of $199,000 and another resident who lost nearly all his savings amounting to $20,500.
What penalties are being sought by the NY Attorney General?
The Attorney General is seeking to indefinitely bar the implicated companies from offering securities or commodities within New York. She also seeks restitution for the defrauded investors and forfeiture of any profits gained from the alleged fraudulent activities.
How has Gemini responded to the lawsuit?
Gemini issued a statement asserting that it, along with its Earn users and other creditors, are the victims in this scenario. The company disagrees with its inclusion in the lawsuit and plans to defend itself vigorously against the charges.
What are the broader implications for the cryptocurrency sector?
The lawsuit represents a concerted effort by the New York Attorney General’s office to impose stricter regulatory oversight on the cryptocurrency sector, amid growing concerns about consumer protection and ethical conduct in the industry.
More about Gemini lawsuit
- New York Attorney General’s Official Press Release
- Gemini’s Official Response to the Lawsuit
- Details about the Gemini Earn Program
- Three Arrows Capital Collapse: What Happened?
- New York Cryptocurrency Regulation Efforts
- Previous Settlements by NY Attorney General in Crypto Sector
- Consumer Protection Concerns in Cryptocurrency
- Understanding Cryptocurrency Risks