Digital Currency Group Seeks Dismissal of Lawsuit Filed by New York Attorney General
Digital Currency Group (DCG) has submitted a motion to the New York Supreme Court to dismiss a lawsuit filed against the company by New York Attorney General Letitia James. The lawsuit alleges that DCG, along with its lending subsidiary Genesis and crypto firm Gemini, defrauded over 230,000 investors of more than $1 billion. DCG’s CEO, Barry Silbert, is also named as a defendant in the lawsuit.
Attorneys Dismiss Claims as Baseless
The lawsuit accuses DCG of trying to hide losses exceeding $1.1 billion from investors and Gemini during the 2022 crypto market collapse. However, DCG’s attorneys argue that the claims made by the attorney general’s office are “baseless” and lack substance. They describe the allegations as a “thin web of baseless innuendo” and accuse the office of searching for a “headline-worthy scapegoat.”
DCG’s legal team asserts that the company acted in good faith and had guidance from top accountants and investment bankers. They point out that DCG supported its subsidiary by issuing a controversial $1.1 billion promissory note to Genesis but argue that this should not be seen as participation in fraud.
Background on Digital Currency Group
Digital Currency Group was established in 2015 and has gained influence within the crypto industry through its venture portfolio and subsidiaries, including Genesis, Foundry (a mining firm), and CoinDesk (a crypto publication). Alongside Gemini, Genesis lent assets to trading firms such as Three Arrows Capital and Alameda Research.
In 2021, Gemini introduced its Earn program, which allowed customers to earn high yields on their crypto assets. Genesis partnered with Gemini to lend out customer assets and also lent to firms like Three Arrows Capital and Alameda Research. However, the program collapsed in 2022 following the failure of Genesis’s counterparties. Genesis subsequently halted withdrawals, filed for bankruptcy, and faced legal action from the Securities and Exchange Commission and the New York Office of the Attorney General.
DCG Denies Involvement in Lawsuit Charges
DCG maintains that it was not involved in many of the charges outlined in the lawsuit. The company denies allegations of misrepresentation by Gemini regarding the risks of the Earn program. DCG’s attorneys argue that accusations of fraud against DCG rely on retweets of content by others, citing a federal statute that prohibits liability for retweeting.
Furthermore, DCG’s attorneys claim that the promissory note was valid and properly endorsed by the company’s board of directors and advisors. They argue that statements made by DCG about its business operating “normally” were too vague to serve as the basis for a fraud claim.
Ongoing Lawsuit and Bankruptcy Proceedings
While the lawsuit between Digital Currency Group and Attorney General Letitia James is ongoing, Genesis settled with the office in February as part of its bankruptcy proceedings. Currently, DCG and Genesis are involved in a dispute concerning the subsidiary’s bankruptcy plans.
Hot Take: Digital Currency Group Fights Back Against Allegations
Digital Currency Group is pushing for the dismissal of a lawsuit filed by New York Attorney General Letitia James. The company denies allegations of defrauding investors and concealing losses, calling them baseless and a thin web of innuendo. DCG argues that it acted in good faith with guidance from top professionals but is being unfairly targeted as a scapegoat. The outcome of this legal battle will have significant implications for DCG and the broader crypto industry.
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