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The New York Attorney General Sues Major Crypto Companies

BlockNews.com Team by BlockNews.com Team
October 28, 2023
in Business, Crypto, Finance
The New York Attorney General Sues Major Crypto Companies
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  • New York Attorney General sued Gemini, Genesis, and Digital Currency Group for allegedly defrauding over 230,000 investors out of $1 billion through the Gemini Earn program.
  • Gemini partnered with Genesis to offer Gemini Earn, allowing customers to earn interest by lending crypto, but allegedly misled investors about the risks.
  • Lawsuit alleges the companies failed to disclose concentration risk from loans to Alameda Research and conflicts of interest while using funds to prop up Alameda.

New York Attorney General Letitia James filed a lawsuit on Thursday against three major crypto companies – Gemini Trust Company, Genesis, and Digital Currency Group – alleging they defrauded more than 230,000 investors out of over $1 billion.

🚨 NEWS: @GeminiTrustCo faces a lawsuit over an alleged $1.1 billion fraud linked to their crypto-lending program.

The lawsuit claims the companies misled investors about risks in their 2021 crypto-lending venture.

This causes significant losses amid the crypto market downturn.… pic.twitter.com/Kg69d5Kajl

— BlockNews.com (@blocknewsdotcom) October 19, 2023

Background on the Companies Involved

Gemini is a crypto exchange that operated an investment program called Gemini Earn with Genesis, a crypto lender owned by Digital Currency Group. Gemini Earn allowed customers to earn interest on their crypto by lending it out through Genesis.

Details of the Alleged Fraud

The lawsuit alleges that Gemini lied to Earn investors about the program’s risks despite knowing that Genesis loans were undercollateralized and heavily concentrated.

At one point in 2022, nearly 60% of Genesis’ outstanding third-party loans were lent to FTX‘s sister hedge fund Alameda Research.

When FTX collapsed, Genesis was unable to repay all the funds lent out through Earn, leaving hundreds of thousands of customers unable to access their crypto holdings.

The attorney general accused the companies of misrepresenting the safety of the Earn program and failing to disclose the concentration risk and conflicts of interest.

By allegedly misleading investors about the risks, the companies were able to continue attracting new investment and using the funds to prop up Alameda Research.

Tags: BusinesscryptoCrypto RegulationFTXPolitics
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BlockNews.com Team

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