- Gemini, Genesis, and Digital Currency Group (DCG) are under fire for allegedly covering up $1.1 billion in losses and misleading over 230,000 investors.
- NY State Attorney General Letitia James pushes for a ban on the implicated firms from New York’s financial sector and demands compensation for the aggrieved investors.
Diving into the Allegations: Major Crypto Entities under Legal Siege
New York State, a financial powerhouse and epicenter of several regulatory battles, has once again become the arena where powerful crypto entities face stringent scrutiny. Leading this charge is Attorney General Letitia James, who recently unveiled shocking allegations against three renowned crypto firms.
Gemini’s Misleading Earn Program
Gemini, a widely recognized crypto exchange, finds itself in the crosshairs primarily because of its Gemini Earn program. This initiative promised users the opportunity to earn yields on their crypto holdings. However, James alleges that Gemini was not transparent about the risks associated with this program, misleading investors into believing they were making a safe bet. To roll out this offering, Gemini collaborated with Genesis, a lending firm.
The investigation further revealed that Genesis’ loans were often “undersecured.” Alarmingly, a substantial chunk of these loans was tied to Alameda Research, the trading counterpart of the now-defunct crypto exchange FTX, overseen by its controversial CEO, Sam Bankman-Fried.
Key Executives Accused
The lawsuit doesn’t merely focus on the corporate entities; it also points fingers at influential figures within these companies. Soichiro Moro, the erstwhile CEO of Genesis, and Barry Silbert, the head honcho at DCG, are among those named in the lawsuit.
James is determined to ensure that such alleged malpractices do not go unchecked. Her proposed legal action seeks not just compensation for the investors who suffered losses but also aims to extract the profits made through these alleged deceptive means. Perhaps more significantly, she’s pushing to exclude these firms from New York’s financial investment scene altogether.
To emphasize the magnitude of the issue, James remarked,
“These cryptocurrency companies lied to investors and tried to hide more than a billion dollars in losses, with middle-class investors bearing the brunt.”
Earlier this year, Genesis crumbled into bankruptcy, leaving a staggering $735 million debt to members of its Earn program. Additionally, Gemini’s co-founder, Cameron Winklevoss, asserted that both DCG and Silbert, along with other executives and Genesis, produced deceptive financial reports to mislead their creditors, presenting an image of stability.