Gemini Trust Co. and Barry Silbert’s Digital Currency Group (DCG) are facing a lawsuit filed by New York’s Attorney General Letitia James, alleging fraudulent activities that cost customers $1.1 billion, further compounding the legal challenges that both companies have encountered due to the cryptocurrency market’s downturn last year.
The lawsuit, initiated on Thursday, claims that Gemini, a cryptocurrency exchange, and DCG’s Genesis Global Capital unit, failed to disclose the risks associated with their 2021 crypto-lending program, which ultimately led to significant losses as several prominent cryptocurrency businesses, including FTX led by Sam Bankman-Fried, faced financial trouble.
The state alleges that Gemini, co-founded by Tyler Winklevoss and Cameron Winklevoss, provided misleading information to customers about the program’s riskiness and concealed the fact that a substantial portion of their third-party loans went to Alameda Research, a crypto trading firm owned by Bankman-Fried.
These allegations by New York’s Attorney General add to the existing legal disputes that these companies are entangled in, with the US Securities and Exchange Commission having previously sued both Genesis and Gemini over their failed crypto-lending venture known as Gemini Earn earlier this year.
Furthermore, these firms have been involved in lawsuits against each other, with Genesis, which filed for bankruptcy in January, suing its parent company DCG to recover about $620 million in loans. Additionally, Gemini has also filed a lawsuit against DCG and Barry Silbert, seeking compensation for alleged fraud and deception related to Gemini Earn.
Attorney General Letitia James views these alleged fraudulent activities as another instance of unethical behavior in the under-regulated cryptocurrency industry, vowing to continue her efforts to halt deceptive practices and advocate for more robust regulations to safeguard investors.
In response, DCG has asserted its commitment to lawful and ethical business practices, pledging to contest the state’s allegations. The company also expressed its surprise at the abrupt filing of the complaint, denying any wrongdoing by DCG, Barry Silbert, or its employees.
Gemini, on the other hand, welcomed the complaint against Genesis and DCG but strongly disagreed with the decision to sue Gemini, asserting that it is unjust to blame a victim who was defrauded and misled. The company expressed its readiness to defend itself against these allegations. Representatives for Genesis did not provide a response to requests for comment.
