New York Attorney General Letitia James on Thursday sued cryptocurrency company Genesis Global, its parent company Digital Money Group (DCG) and Gemini, accusing it of “defrauding” investors of more than $1 billion (approximately Rs. 8,317 crore).
The development highlights the challenges the cryptocurrency industry continues to face nearly a year after the collapse of Sam Bankman-Fried’s exchange FTX, which collapsed the industry and overwhelmed several major companies.
Through the lawsuit, Attorney General James is seeking compensation to investors and the “restitution of ill-gotten gains” while banning all three cryptocurrency companies from entering New York’s financial investment industry.
At the heart of the lawsuit is a program called “Gemini Earn” run by Gemini in partnership with Genesis. The program allows customers to lend crypto assets such as Bitcoin to Genesis.
James claims that Gemini, which is run by the Winklevoss twins and is known for its legal battles with Meta Platforms’ Mark Zuckerberg, has called the project “even though its internal analysis found risks to Genesis’ financial health.” Low risk investment”.
James said Gemini knew Genesis’ loans were undersecured and were at one time highly concentrated in one entity, Bankman-Fried’s cryptocurrency hedge fund Alameda, which later went bankrupt.
Gemini did not disclose any such information to Gemini Earn investors, she added.
Gemini posted on messaging platform
Genesis and Gemini have clashed multiple times over the past few months, including over issues with Gemini Earn. Gemini is also the largest creditor of Genesis, which filed for bankruptcy protection in January.
DCG said it was blindsided by the attorney general’s complaint, and CEO Barry Silbert said the lawsuit had “baseless allegations.”
The DCG added: “We fully intend to contest these charges and look forward to being proven in this case… We have been actively cooperating with the Attorney General’s investigation for several months.”
DCG assumed some of Genesis’ liabilities last year to cushion the unit from exposure to bankrupt cryptocurrency hedge fund Three Arrows Capital.
“Last year, DCG and I aimed to help Genesis weather the storm caused by the collapse of Three Arrows… Unfortunately, this lawsuit ignores this basic fact,” Hilbert said.
© Thomson Reuters 2023
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