In a groundbreaking move, the New York Attorney General’s office has initiated legal action against prominent cryptocurrency entities Genesis Global Capital, Gemini Trust, and Digital Currency Group (DCG) in response to alleged fraudulent activities.
The complaint, filed earlier today, also implicates former Genesis CEO Soichiro Michael Moro, as well as Barry E. Silbert, the founder and CEO of DCG.
Attorney General Letitia James voiced her concerns, stating, “These cryptocurrency companies lied to investors and tried to hide more than a billion dollars in losses, and it was middle-class investors who suffered as a result.”
Genesis Global Capital, once a thriving New York-based lending market, succumbed to bankruptcy in January, marking one among several Genesis entities affected.
Gemini, the brainchild of Tyler and Cameron Winklevoss, is a leading cryptocurrency exchange. DCG, a significant player in the crypto industry, boasts ownership of a diverse portfolio of assets, including Genesis, crypto investment firm Grayscale, and media outlet CoinDesk.
The lawsuit brought forth by the New York Attorney General alleges that the three entities engaged in fraudulent activities affecting a staggering 232,000 customers and resulting in losses surpassing $1 billion.
The suit categorizes the alleged misdeeds into two distinct schemes—the “Gemini Scheme” and the “DCG Scheme.”
The “Gemini Scheme” centers on accusations that Gemini misrepresented the creditworthiness of Genesis Global while soliciting users for its Earn program. Under this program, users were promised yield on their dormant cryptocurrencies. Gemini achieved this by depositing these holdings with Genesis Global. Withdrawals were abruptly halted last year.
Subsequently, the “DCG Scheme” purportedly came into play after the Genesis entities endeavored to conceal a “structural hole” at Genesis Capital, amounting to over $1 billion. This financial void emerged in the wake of the collapse of Three Arrows Capital, a Singapore-based hedge fund that declared bankruptcy last year.
This legal action signifies a pivotal moment in the regulation of the cryptocurrency space, as authorities demonstrate an unwavering commitment to protect investors and maintain integrity within the rapidly evolving industry.