Gemini, Genesis, DCG Sued by New York Attorney General for Allegedly Defrauding Investors

New York Attorney General (NYAG) Letitia James today filed a lawsuit against cryptocurrency companies Gemini Trust Co. (Gemini), trading firm Genesis Global Capital and conglomerate Digital Currency Group (DCG) for allegedly defrauding more than 230,000 investors, including at least 29,000 New Yorkers, of more than $1 billion.

The NYAG is seeking to ban Gemini, Genesis, and DCG from the financial investment industry in New York.

Gemini lent funds to Genesis, which is owned by DCG, as part of its Earn program. The funds were later lent to counterparties such as trading firms Three Arrows Capital and Alameda Research, which ultimately went bankrupt. This left Genesis with a $1.1 billion hole. DCG also owns CoinDesk.

The lawsuit alleges Gemini knew Genesis’ loans were undersecured and at one point highly concentrated with one entity, Sam Bankman-Fried's trading firm Alameda, but did not reveal this information to investors.

The NYAG also charged Genesis and former CEO Soichiro Moro as well as DCG and CEO Barry Silbert with defrauding investors and the public by trying to conceal more than $1.1 billion in losses, which were borne by investors. They "disguised $1.1 billion in losses through a months-long campaign of misstatements, omissions, and concealment” by way of a promissory note, according to the suit.

"The tweets were false, misleading, and omitted material facts. DCG did not simply 'assume' the $1.1 billion, open-term liability related to Three Arrows, which could be called at any time; it replaced that liability with an illiquid ten-year Promissory Note," the NYAG complaint stated.

“My office will continue our efforts to stop deceptive cryptocurrency companies and push for stronger regulations to protect all investors,” James said.

Spokespeople for DCG, Gemini and Genesis did not immediately respond to a request for comment from CoinDesk.

Jack Schickler contributed reporting.

UPDATE (Oct. 19, 11:49 UTC): Adds details throughout.