New York Attorney General Letitia James on Friday expanded her lawsuit against crypto companies Genesis and Gemini, tripling the size of their alleged fraud scheme to more than $3 billion.
The amended complaint expands a lawsuit James filed in October against Digital Valuta Group, his Genesis Global Capital unit, and Gemini Trust, the exchange run by twin brothers Cameron and Tyler Winklevoss.
They claimed they caused more than $1 billion in losses by misleading investors about the Gemini Earn program, which allowed customers to lend crypto assets to Genesis in exchange for high returns.
The attorney general said that as more investors came forward, it became clear that “the scam perpetrated by DCG through Genesis” also ensnared investors who sent money directly to Genesis and were falsely assured that their money was safe.
Many of the additional investors were small retail clients, including a chiropractor and a stay-at-home dad who each invested $2 million in bitcoin with Genesis, the complaint said.
Gemini, run by the Winklevoss twins known for their legal battles with Meta founder Mark Zuckerberg, praised Earn as “low risk” even as internal analysis had shown Genesis to be on risky financial footing, James claimed.
James is seeking more than $3 billion in restitution for the more than 230,000 investors she claims were defrauded.
“This illegal cryptocurrency scheme and the horrific financial losses suffered by real people are yet another reminder of why stricter cryptocurrency regulation is needed to protect all investors,” James said in a statement.
Barry Silbert, the CEO of DCG, and Soichiro Moro, a former CEO of Genesis, are also defendants.
A DCG spokesperson told DailyMail.com in a statement: ‘There is nothing new here. This is the same baseless complaint that has been recirculated to generate another round of headlines.
“We will aggressively fight the claims and we will win. DCG has always conducted its business lawfully and with integrity, and DCG and Barry Silbert will be fully vindicated.”
Genesis will close after filing for bankruptcy in January 2023.
Gemini, run by the Winklevoss twins known for their legal battles with Meta founder Mark Zuckerberg, praised Earn as “low risk” even as internal analysis had shown Genesis to be on risky financial footing, James claimed.
Genesis parlayed the funds into large loans for major players in the crypto space — including at one point a nearly $2 billion loan to Alameda Research, the hedge fund of disgraced FTX founder Sam Bankman-Fried.
James is seeking more than $3 billion in restitution for the more than 230,000 investors she claims were defrauded
Although the Alameda loan was recalled before the collapse of FTX sent shockwaves through the crypto industry, James claims it was one of the risky and undersecured loans that Gemini and Genesis hid from Earn investors.
Days after FTX’s implosion in November 2022, Genesis suspended withdrawals, owing at least $1 billion to more than 232,000 Earn investors, including at least 29,000 New Yorkers, according to the new lawsuit.
On Thursday evening, the company reached a settlement with James’ office, agreeing to pay her fraud claims as long as it reimburses customers in full through the Chapter 11 process. This settlement requires the approval of a bankruptcy judge.
Genesis filed for bankruptcy two months after halting withdrawals from Gemini Earn customers following the collapse of Sam Bankman-Fried’s FTX cryptocurrency exchange.
Both Genesis and Gemini were also sued by the U.S. Securities and Exchange Commission, which said they circumvented disclosure requirements designed to protect Gemini Earn customers.
Last week, Genesis agreed to pay the SEC a $21 million fine, also conditional on customers paying back first.
Gemini, meanwhile, has sued DCG over the failure of their crypto lending partnership.