New York Attorney General Letitia James has filed a lawsuit against cryptocurrency companies Gemini Trust Company (Gemini), Genesis Global Capital, LLC and its affiliates (Genesis), and Digital Currency Group, Inc. (DCG) for allegedly defrauding more than 230,000 investors, including at least 29,000 New Yorkers, of more than $1B.

The lawsuit alleges that Gemini, in collaboration with Genesis, ran an investment program called Gemini Earn. Gemini repeatedly assured investors that investing with Genesis through their Gemini Earn program was a low-risk investment. However, the Office of the Attorney General (OAG) found that Gemini’s internal analyses of Genesis showed that the company’s financials were risky.

The lawsuit further alleges that Gemini knew Genesis’ loans were under-secured and at one point highly concentrated with one entity, Sam Bankman-Fried’s Alameda. Despite this knowledge, Gemini did not reveal this information to investors.

Concealment of Losses

The lawsuit also charges Genesis, its former CEO Soichiro Moro, its parent company, DCG, and DCG’s CEO Barry Silbert with defrauding investors and the public by trying to conceal more than $1.1B in losses. These losses were borne by investors as a result of these misleading claims and deceptions.

Impact on Investors

Gemini, Genesis, and DCG’s alleged fraud led to roughly $1B in losses for more than 230,000 investors, including at least 29,000 New Yorkers. One of the New York investors harmed by Gemini Earn was a retired 73-year-old grandmother who invested her and her husband’s lifesavings of over $199,000 in Gemini Earn because they believed Gemini’s marketing statements that it was a safe and secure choice.

Through this lawsuit, Attorney General James seeks to ban Gemini, Genesis, and DCG from the financial investment industry in New York. She also seeks restitution for investors and disgorgement of ill-gotten gains.

In a statement, Attorney General James said: "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”.

She further added that hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn. "Instead, Gemini hid the risks of investing with Genesis and Genesis lied to the public about its losses. This fraud is yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry. My office will continue our efforts to stop deceptive cryptocurrency companies and push for stronger regulations to protect all investors."