NY AG sues crypto firms Gemini, Genesis, DCG for allegedly defrauding investors out of $1 billion

New York Attorney General Letitia James filed a lawsuit Thursday against cryptocurrency firms Gemini, Genesis Global Capital and its parent company Digital Currency Group (DCG) for allegedly defrauding investors out of more than $1 billion, adding to the mounting crypto crackdown by regulators in the wake of the collapse of Sam Bankman-Fried’s FTX.

The lawsuit claims that Gemini, founded by billionaire twins Cameron and Tyler Winklevoss – best known for suing Meta CEO Mark Zuckerberg over Facebook’s early days – “lied to investors” by assuring them their investments were safe in the Gemini Earn program it ran with now-bankrupt Genesis. 

However, the suit alleges, Genesis’ loans were actually risky, because at one point they were “highly concentrated” with Bankman-Fried’s crypto hedge fund Alameda Research, which Gemini purportedly knew and did not disclose.

The New York AG also sued former Genesis CEO Soichiro Moro and DCG founder and CEO Barry Silbert, claiming the executives and the companies deceived investors as well as the public by attempting to hide more than $1.1 billion in losses.

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“These cryptocurrency companies lied to investors and tried to hide more than a billion dollars in losses, and it was middle-class investors who suffered as a result,” James said in a statement. “Hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn. Instead, Gemini hid the risks of investing with Genesis and Genesis lied to the public about its losses.”

James is seeking restitution for investors from the three companies and seeks to ban the firms from doing business in New York.

When reached for comment, Gemini directed FOX Business to a statement it posted on X, the social media platform formerly known as Twitter.

“Today, the @NewYorkStateAG sued Genesis, its former CEO @michaelmoro, its parent company @DCGco, and DCG’s CEO @BarrySilbert personally for conspiring to lie and defraud Gemini, Earn users, and other Genesis creditors,” the post reads. “The NY AG’s lawsuit confirms what we’ve been saying all along — that Gemini, Earn users, and other creditors were the victims of a massive fraud and systematically ‘lied to’ by these parties about ‘Genesis’s financial condition.’”

The statement adds, “With that said, we wholly disagree with the NY AG’s decision to also sue Gemini. Blaming a victim for being defrauded and lied to makes no sense and we look forward to defending ourselves against this inconsistent position.”

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Both DCG and Silbert pushed back against the claims made in James’ lawsuit.

“We fully intend to fight the claims and look forward to being vindicated in this case,” the company said. “DCG has always conducted its business lawfully and with integrity. We have actively cooperated for months with the Attorney General’s investigation in an open and transparent manner. We were blindsided by the filing of the complaint, and there is no evidence of any wrongdoing by DCG, Barry Silbert, or its employees.”

Silbert said in a separate statement that he is “shocked by the baseless allegations in the Attorney General’s complaint and intend[s] to fight these claims in court.”

“Honesty and integrity have always been my guiding principles,” Silbert’s statement continues. “Last year, my and DCG’s goal was to help Genesis weather the storm caused by the collapse of Three Arrows and position Genesis for success going forward. It is unfortunate that this lawsuit omits that fundamental fact.”