New York’s Government Initiated Legal Action Against Gemini, Genesis, and DCG

New York's government

The New York government has filed a lawsuit against Gemini, Genesis, and DCG. On October 19, 2023, New York Attorney General Letitia James filed a legal action against cryptocurrency companies, accusing them of deceiving over 230,000 investors, including at least 29,000 in New York, with losses exceeding $1 billion.

The companies named in the lawsuit include the cryptocurrency exchange Gemini, the bankrupt cryptocurrency lending company Genesis, along with former CEO Michael Moro, and the investment firm DCG with CEO Barry Silbert.

The specific allegations outlined in the lawsuit are:

  • Genesis borrowing from Gemini: Gemini allegedly lent money to Genesis through the Earn program. This money was then used to lend to their partners, including Three Arrows Capital (3AC) and Alameda Research, both of which are affiliated with the bankrupt cryptocurrency trading platform FTX.
  • Financial crisis cover-up: In 2022, a “liquidity crisis” in the crypto market led to Genesis defaulting on loans, resulting in a reported loss of up to $1 billion. DCG allegedly attempted to conceal this financial loss by claiming to have “absorbed” it, while, in reality, they recorded the amount as an “asset” on the financial balance sheet of their subsidiary, Genesis.
  • DCG’s debt replacement: NYAG claims that DCG did not merely “assume” the $1.1 billion debt related to 3AC, which could be paid off at any time, but they replaced that debt with a 10-year illiquid promissory note.
  • Gemini’s misrepresentations: NYAG asserts that Gemini provided inaccurate evaluations of Genesis’ collateralized loans, which were allegedly overleveraged. Data from NYAG indicates that Genesis’ collateralized loans ranged from 60-90% between December 2020 and September 2022.
  • DCG’s inability to repay: NYAG alleges that DCG truly did not have the funds to repay over $600 million (due in May 2023) from Genesis during the period from January 2022 to July 2022.

NYAG’s final accusations include:

  • Gemini’s deception of customers: Accusing Gemini of deceiving customers and obtaining funds by falsely presenting Gemini Earn as a high liquidity investment and promoting Genesis as a reputable credit fund based on Gemini’s risk assessment tool.
  • DCG, Genesis, and executives’ cover-up: Accusing DCG, Genesis, and named executives of “concealing the financial crisis with a $1.1 billion loss” through prolonged misleading behaviors, misrepresentation, and cover-ups.

Finally, NYAG is seeking legal enforcement of several measures, including restrictions on engaging in securities and commodity trading in New York and demanding compensation for damages, fines, and forfeiture of profits obtained from fraudulent activities. The legal dispute follows the significant impact of the FTX collapse on Genesis, which filed for bankruptcy in January 2023. In the latest developments, DCG has announced a new plan for Gemini Earn users to recover assets, estimated at 70-90% of their value.

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Chi Do
Chi Do
Chi Do is a content writer at CoinMinutes, responsible for creating most of the content on the website, including news related to Bitcoin (BTC), Ethereum (ETH), Blockchain, Decentralized Finance (DeFi), and more. With a keen interest in cryptocurrencies since the 2020s, Chi has acquired extensive experience and knowledge in this field. Chi holds a Bachelor's degree in communication from Academy of Journalism and Communication in Vietnam.

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