New York Attorney General Letitia James has filed an amended lawsuit against crypto firm Gemini and its parent company, Digital Currency Group (DCG). The lawsuit alleges that nearly 250,000 investors were defrauded of over $3 billion, an increase from the $1 billion claimed in the original suit.
The initial lawsuit, filed in October, accused Genesis, the former CEO Soichiro Moro, DCG, and CEO Barry Silbert of defrauding investors by attempting to hide more than $1.1 billion in losses incurred by investors.
The suit has been updated following new claims from additional DCG investors who assert that they were misled regarding the safety of their investments, according to AG James.
“After months of false promises, we pulled the curtain back and revealed that DCG was lying to investors and defrauding them out of billions,” said Attorney General James. “The fraud and deceit were so expansive that many additional people have come forward to report similar harm.”
The lawsuit centers on a failed partnership between Gemini and DCG subsidiary Genesis regarding the Earn interest-bearing product. In 2022, customer assets were frozen after Genesis halted withdrawals following the collapse of FTX.
The allegations claim that Gemini misled investors about the Earn program, assuring customers that it was a low-risk investment, despite internal analyses indicating that Genesis’ financial situation was precarious.
Furthermore, the lawsuit asserts that Gemini was aware that Genesis’ loans were undersecured and heavily concentrated with a single entity, Sam Bankman-Fried’s Alameda, but failed to disclose this information to investors.
According to AG James, following a loss of over $1.1 billion from loan defaults, Genesis, DCG, and their executives attempted to conceal their losses by entering into a $1.1 billion promissory note where DCG agreed to pay Genesis the sum over a decade at a low interest rate of just one percent.
The lawsuit contends that DCG, through Genesis, used the promissory note as part of a scheme designed to mislead investors and the public regarding Genesis’ financial health and operational capabilities.