Cryptocurrency firm Gemini, DCG, Genesis sued in US over $1 billion fraud

New York Attorney General Leticia James sued cryptocurrency companies on Thursday Genesis Global, its parent company Digital Currency Group (DCG) and Gemini For allegedly “cheating” investors of $1 billion (roughly Rs. 8,317 crore).

The development underscores the challenges the crypto industry continues to face nearly a year after the bankruptcy of Sam Bankman-Fried’s exchange. FTXThat led to a downturn in the sector that overwhelmed several large firms.

Through the lawsuit, Attorney General James is seeking “disgorgement of ill-gotten gains,” including restitution for the investors and sanctions against the three. Cryptocurrency Financial investment industry firms in New York.

At the center of the case is a program that Gemini ran in partnership with Genesis, called “Gemini Earn.” The program allows customers to lend crypto assets like Bitcoin to Genesis.

Gemini, directed by The Winklevoss The twins are best known for their legal battle against the Meta platform Mark ZuckerbergBilled the program as a “low-risk investment” even when its internal analysis had Genesis on risky financial footing, James alleged.

Gemini knew that Genesis’s loans were unsecured and at one point was highly focused on one of Bankman-Fried’s entities. Crypto The hedge fund Alameda later went belly up, James said.

Gemini has not disclosed any of this information to Gemini Arn’s investors, he added.

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Genesis and Gemini have clashed several times in the last few months, including the Gemini Arn. Gemini is the largest creditor to Genesis, which filed for bankruptcy protection in January.

DCG said it was blindsided by the attorney general’s allegations, and company CEO Barry Silbert said the lawsuit contained “baseless allegations.”

DCG added, “We fully intend to fight the allegations and look forward to being vindicated in this case … We have actively cooperated with the Attorney General’s investigation for months.”

DCG took over some of Genesis’ liabilities last year to cushion the unit from exposure to bankrupt crypto hedge fund Three Arrows Capital.

“Last year, my goal and that of DCG was to help Genesis weather the storm caused by the collapse of the Three Arrows… It’s unfortunate that this lawsuit ignores that fundamental truth,” Silbert said.

© Thomson Reuters 2023

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