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Attorney general Letitia James brings lawsuit against Genesis Global and parent DCG and Gemini

Guardian staff and agencies

Thu 19 Oct 2023 13.21 EDT

The New York attorney general, Letitia James, on Thursday sued the cryptocurrency firms Genesis Global, and its parent company Digital Currency Group (DCG), and the Winklevoss twins Gemini for allegedly defrauding investors of more than $1bn.

At the heart of the lawsuit is a program Gemini ran in partnership with Genesis. Dubbed Gemini Earn, the program let customers lend crypto assets such as bitcoin to Genesis. Gemini had billed the program as a low-risk investment even when its internal analyses had found Genesis was on risky financial footing, James alleged.

Gemini is run by the billionaire twins Cameron and Tyler Winklevoss, crypto bulls who sued Mark Zuckerberg for allegedly stealing the idea for Facebook from them nearly two decades ago. Customers have levelled heavy criticism at the pair and sued them for making a secret $282m on 9 August 2022, according to the New York Post. The company called it a a wise and prudent decision. Gemini froze $900m in Gemini Earn customer assets in November 2022. The SEC sued Gemini in January 2023 for allegedly offering unregistered securities.

The development underscores the challenges the crypto industry continues to face almost a year after the bankruptcy of Sam Bankman-Frieds exchange FTX, which had led to an industry meltdown.

The turmoil eventually hit Genesis, which in January filed for bankruptcy. Genesis has clashed with Gemini, its largest creditor, several times over the past few months.

Gemini knew Genesiss loans were under-secured and at one point highly concentrated with one entity, Bankman-Frieds crypto hedge fund Alameda that later went belly up, James said.

It did not reveal any of this information to the investors of Gemini Earn, she added.

Genesis and its former CEO Soichiro Moro as well as DCG and its chief, Barry Silbert, have also been charged with trying to conceal more than $1.1bn in losses.

DCG and Gemini did not immediately respond to Reuters requests for comment.

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Cryptocurrency firms sued over $1bn investor fraud by New York state - The Guardian