NY Attorney General Expands Fraud Case Against DCG to $3 Billion

On Friday, NY Attorney General Letitia James expanded her legal action against Digital Currency Group (DCG) and other cryptocurrency entities, tripling the alleged size of their fraudulent activities to over $3 billion, according to e Reuters report.

In October, the NY Attorney General had initially filed a lawsuit against DCG, including its Genesis Global Capital unit, and Gemini Trust, the exchange led by Cameron and Tyler Winklevoss. The lawsuit claimed that these entities caused over $1 billion in losses by deceiving investors about the Gemini Earn program, where customers could lend crypto assets to Genesis in exchange for a high return.

James asserted that as more investors stepped forward, it became evident that the fraudulent scheme extended beyond those involved in the Gemini Earn program. Investors who directly sent money to Genesis were falsely assured of the safety of their funds.

The expanded lawsuit revealed that additional victims included retail customers, such as a chiropractor and a stay-at-home father, each investing $2 million in bitcoin with Genesis. The attorney general is now seeking over $3 billion in restitution for more than 230,000 investors believed to have been defrauded.

In a statement, James emphasized the need for stronger cryptocurrency regulations to protect investors. "This illegal cryptocurrency scheme, and the horrific financial losses that real people have suffered, are yet another reminder of why stronger cryptocurrency regulations are needed to protect all investors," James said.

DCG responded on Friday, dismissing James' lawsuit as "baseless" and expressing confidence in winning in court.

Genesis, facing bankruptcy since January 2023, recently reached a settlement with James' office, agreeing to pay on the fraud claims, contingent on full repayment to customers through the Chapter 11 process, pending a bankruptcy judge's approval.

Notably, Barry Silbert, DCG's CEO, and Soichiro Moro, a former Genesis CEO, are also named as defendants. Genesis filed for bankruptcy after suspending withdrawals by Gemini Earn customers following the collapse of FTX cryptocurrency exchange. Both Genesis and Gemini were separately sued by the U.S. Securities and Exchange Commission (SEC), which alleged they circumvented disclosure requirements designed to safeguard Gemini Earn customers.

Last week, Genesis agreed to a $21 million fine with the SEC, conditional on prioritizing customer repayments. Gemini has counter-sued DCG over the failure of their crypto lending partnership.