New York AG Alleges Fraud was the Genesis of $1 Billion in Crypto Losses

  • New York AG Letitia James filed a lawsuit against cryptocurrency companies Gemini Trust Company, LLC; Genesis Global Capital, LLC and its affiliates (“Genesis”); Digital Currency Group, Inc.; and the CEOs of Genesis and DCG alleging that the collective defendants violated the Martin Act and the New York Executive Law, as well as state criminal laws, by engaging in fraudulent and deceptive conduct towards investors and the public.
  • According to AG James’ complaint, Gemini and Genesis perpetrated a scheme to fraudulently advertise investments as “low-risk,” despite knowing that internal risk analyses showing that Genesis’ loan book was undercollateralized. The lawsuit also alleges that Genesis and its parent company DCG conspired to falsely represent Genesis’ financial condition in order to conceal its inability to repay its liabilities, and that the companies attempted to conceal more than $1 billion in losses that were borne by investors.
  • The complaint seeks a permanent injunction banning the defendants from engaging in any business related to sales of securities or commodities in New York; a permanent injunction prohibiting future fraudulent or deceptive acts; damages; disgorgement; restitution; and civil penalties.
  • This suit is the latest in a string of enforcement efforts AG James has taken within the cryptocurrency industry; we recently covered a $4.3 million settlement with Coin Cafe, Inc. to resolve allegations the trading platform misled investors.