Crypto Firms Genesis, DCG and Gemini Targeted in U.S. Attorney General’s $1 Billion Fraud Lawsuit
In Brief
New York Attorney General sues Genesis Global, Digital Currency Group (DCG) and Gemini for alleged investor fraud surpassing $1 billion.
The case focuses on the “Gemini Earn” program, involving cryptocurrency lending, and questions the entities’ disclosure practices.
New York’s Attorney General, Letitia James, has filed a lawsuit against cryptocurrency companies Genesis Global and its parent company, Digital Currency Group (DCG), as well as Gemini, accusing them of “defrauding” investors of over $1 billion.
Through the lawsuit, Attorney General James seeks restitution for investors and “disgorgement of ill-gotten gains” in addition to a ban on all three entities from participating in the financial investment industry in New York.
At the core of the lawsuit is Gemini’s “Gemini Earn” program, which was run in collaboration with Genesis. This program allowed customers to lend cryptocurrency assets, including bitcoin, to Genesis.
“From February 2021, through November 16, 2022, Gemini and Genesis Capital falsely claimed they had all “necessary governmental and other consents, approvals and licenses” to perform their obligations under Earn,”
the lawsuit said.
Despite Gemini promoting the program as a high-yield investment, Attorney General James alleges that internal analyses indicated that Genesis faced financial risks, a fact that was not disclosed to investors. Furthermore, the attorney alleged that Genesis’ loans were undersecured and heavily concentrated with Alameda, the crypto hedge fund of Sam Bankman-Fried, which later went bankrupt.
The ongoing legal dispute between Genesis and Gemini, including their disagreements over ‘Gemini Earn,’ highlights the complexities within the cryptocurrency sector.
Gemini Founders’ Attempt to Clarify the $282 Million Withdrawal
Last month, The New York Post and Bloomberg claimed that Gemini founders, the Winklevoss Twins, withdrew personal funds before Genesis’s collapse. Gemini clarified on X that the withdrawn funds belonged to Earn program users, not the exchange’s corporate funds or the Winklevoss Twins’ personal investments. The exchange defended the move as a wise risk management decision amidst market uncertainty and the ongoing Genesis conflict.
The exchange clarified that the $282 million withdrawal in August 2023 was not related to the personal finances of the Winklevoss Twins or Gemini’s corporate funds. Instead, the withdrawn assets belonged to users of Gemini’s Earn program.
Gemini explained that the terms of the Earn program allowed the exchange to establish a “liquidity reserve” with a portion of the funds deposited by users. In light of market uncertainties, particularly in the aftermath of FTX’s collapse, Gemini decided to allocate $282 million to the liquidity reserve on August 9, 2023.
According to Gemini, this risk management strategy ultimately protected Earn users by reducing their exposure to Genesis when the lender halted redemptions later that year.
Gemini also stands as the largest creditor of Genesis, which filed for bankruptcy protection in January. Both Genesis and former CEO Soichiro Moro, as well as DCG and its chief, Barry Silbert, face charges related to concealing over $1.1 billion in losses.
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About The Author
Agne is a journalist who covers the latest trends and developments in the metaverse, AI, and Web3 industries for the Metaverse Post. Her passion for storytelling has led her to conduct numerous interviews with experts in these fields, always seeking to uncover exciting and engaging stories. Agne holds a Bachelor’s degree in literature and has an extensive background in writing about a wide range of topics including travel, art, and culture. She has also volunteered as an editor for the animal rights organization, where she helped raise awareness about animal welfare issues. Contact her on agnec@mpost.io.
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Agne is a journalist who covers the latest trends and developments in the metaverse, AI, and Web3 industries for the Metaverse Post. Her passion for storytelling has led her to conduct numerous interviews with experts in these fields, always seeking to uncover exciting and engaging stories. Agne holds a Bachelor’s degree in literature and has an extensive background in writing about a wide range of topics including travel, art, and culture. She has also volunteered as an editor for the animal rights organization, where she helped raise awareness about animal welfare issues. Contact her on agnec@mpost.io.
