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New York Attorney General Sues Crypto Firms in $1 Billion Fraud Case


Continuing a ،down on cryptocurrency companies, the New York attorney general accused three major players in the di،al ،et industry of lying to investors and concealing losses in a $1 billion fraud scheme, according to a lawsuit filed on Thursday.

The suit targets Gemini Trust, the exchange run by the twin brothers Tyler and Cameron Winklevoss; the lender Genesis Capital; and Di،al Currency Group, the parent company of Genesis.

The attorney general, Le،ia James, contends in the suit that Gemini lied to investors about the dangers of Gemini Earn, a program s،ed by Gemini and Genesis that promised investors a high rate of return — up to 8 percent — if they essentially lent their cryptocurrency to Genesis.

But Genesis struggled after the FTX cryptocurrency exchange, founded by Sam-Bankman Fried, imploded last November. It froze accounts amid a crash in di،al ،et values, leaving Earn investors unable to reclaim ،dreds of millions of dollars’ worth of cryptocurrency.

According to Ms. James’s suit, internal do،ents at Gemini s،w that just months after Earn was s،ed in 2021, the company’s risk ،ysis teams deemed Genesis very risky — highly leveraged with limited liquidity. Gemini also knew that Genesis loans were at one point ، in Alameda Research, the now-bankrupt crypto hedge fund also founded by Mr. Bankman-Fried, w، is now being tried on criminal fraud charges.

But Gemini did not share the information with investors, leaving at least 29,000 New Yorkers and ،dreds of t،usands of others across the country in the dark about the dangers to their ،ets, Ms. James said.

The lawsuit accuses Genesis and Di،al Currency Group of trying to conceal Genesis’ losses from Gemini, Earn investors and the public. The two firms hid the financial troubles last year when Genesis entered into a $1.1 billion, 10-year promissory note with Di،al Currency, a deal intended to give the false impression that Genesis was on stronger footing and to encourage investors to keep parti،ting in the Earn program, according to the lawsuit.

“This fraud is yet another example of bad actors causing harm throug،ut the under-regulated cryptocurrency industry,” Ms. James said in a statement. “My office will continue our efforts to stop deceptive cryptocurrency companies, and to push for stronger regulations to protect all investors.”

Soichiro Moro, the former Genesis chief executive, and Di،al Currency’s chief executive, Barry Silbert, were also named in the suit.

This is not the companies’ first lawsuit stemming from Gemini Earn. The Securities and Exchange Commission in January charged Gemini and Genesis with offering unregistered securities, raising billions of dollars’ worth of di،al ،ets from ،dreds of t،usands of investors wit،ut the requisite disclosures. Gemini also faces multiple proposed cl،-action lawsuits from investors in Earn.

Ms. James is seeking to bar Gemini, Genesis and Di،al Currency Group from operating in the financial investment industry or doing any business related to the sale and purchase of securities in New York. She is also seeking res،ution for investor losses.

The suit follows other recent efforts by the attorney general’s office to regulate the crypto industry. In May, Ms. James proposed legislation that would require public audits of crypto exchanges, limit conflicts of interest by banning certain owner،p arrangements, build safeguards to prevent fraud, and compensate victims and strengthen oversight of the di،al ،et industry.


منبع: https://www.nytimes.com/2023/10/19/business/cryptocurrency-lawsuit-new-york-winklevoss.html