Letitia James, the Attorney General of New York, has intensified her legal battle against Digital Currency Group (DCG) and its sister company, Gemini Trust Co., by increasing the restitution demand to $3 billion. This move comes shortly after Genesis Global settled with New York over allegations of defrauding investors via the now-defunct Gemini Earn program. The revised lawsuit, representing over 230,000 investors, suggests the fraud’s impact is far more extensive than initially thought.
Originally seeking $1.1 billion in October, the lawsuit’s escalated amount stems from new testimonies by investors who were led to believe their investments were safe. While no new charges have been levied against Gemini, the focus remains on their failure, along with Genesis Global Capital (a DCG subsidiary), to warn investors of the risks in a crypto lending program initiated in 2021. This program’s failure aligns with significant crypto industry bankruptcies, including FTX’s downfall under Sam Bankman-Fried.
Gemini Earn, a joint venture between Gemini and Genesis, promised customers as much as 8% interest for lending their crypto assets. Yet, the lawsuit accuses them of investing heavily in risky entities like Three Arrows Capital, which declared bankruptcy, and Babel Finance, losing over $100 million and severely affecting Genesis’s financial health.
Moreover, the lawsuit criticizes Gemini, operated by the Winklevoss twins, for not fully disclosing the loan risks, especially those made to Alameda Research, also owned by Sam Bankman-Fried. This has led to accusations that Genesis and DCG attempted to conceal their financial issues from investors.