New York Attorney General Files Lawsuit Against Gemini, Genesis, and DCG
New York Attorney General Letitia James has filed a complaint against popular crypto exchange Gemini, crypto lending firm Genesis, and crypto investment company Digital Currency Group (DCG). The lawsuit also targets two executives, former Genesis CEO Michael Moro and DCG CEO Barry Silbert, alleging their involvement in fraudulent schemes that defrauded customers.
Genesis Loans and Cover-Up Allegations
The complaint argues that Gemini provided funds to Genesis as part of its Earn program, which were then lent out to counterparties. However, when multiple bankruptcies occurred within the industry, resulting in defaults to Genesis, the company faced a $1 billion hole. The lawsuit accuses DCG of attempting to cover up these losses by falsely claiming to have absorbed them.
Gemini’s False Assurances and Risk Management Concerns
The lawsuit also claims that Gemini made false assurances regarding the overcollateralization of Genesis’ loans. Data shows that between December 2020 and September 2022, Genesis’ loans were only 60-90% collateralized, contrary to Gemini’s claims. Gemini’s risk management team identified in May 2021 that Genesis was highly leveraged and had low liquidity.
Genesis’ Concealment of Promissory Note
The complaint reveals that Genesis’ CFO instructed employees not to disclose the promissory note to Gemini, actively concealing information about the note and the losses it represented. It was only on October 28, 2022, that Silbert authorized Genesis to disclose the promissory note to Gemini.
DCG Borrowed Over $800 Million from Genesis
The lawsuit also reveals that DCG borrowed over $800 million from Genesis between January and July 2022. The complaint seeks to restrict the defendants from engaging in the sale of securities and commodities in New York, while also demanding damages, penalties, and the forfeiture of any profits derived from their alleged fraudulent activities.
Hot Take: New York Attorney General Sues Gemini, Genesis, and DCG for Fraudulent Activities
New York Attorney General Letitia James has taken legal action against crypto exchange Gemini, crypto lending firm Genesis, and crypto investment company DCG. The lawsuit alleges fraudulent schemes that defrauded customers and attempts to cover up losses. It also accuses Gemini of making false assurances about loan collateralization and reveals Genesis’ concealment of a promissory note. The complaint seeks to restrict the defendants’ activities in New York and demands damages and penalties. This lawsuit highlights the need for transparency and accountability within the cryptocurrency industry.
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