Explosive Revelation: New York AG Uncovers $1 Billion Crypto Scam Targeting Innocent Investors!
New York AG sues crypto firms for $1B fraud, accusing Gemini Trust, Genesis Global Capital, and Digital Currency Group of deceiving investors Losses continue to mount
The repercussions of the massive failure of Sam Bankman-Fried's cryptocurrency business continue to reverberate throughout the digital asset industry almost a year later.
On Thursday, the attorney general of New York filed a lawsuit against three digital asset firms, including Gemini Trust, Genesis Global Capital, and Digital Currency Group (the parent company of Genesis), all of which were implicated in the collapse of Bankman-Fried's empire last autumn. The lawsuit alleges that these companies deceived investors and concealed over $1 billion in losses.
According to the AGs office, an investigation uncovered that Gemini, the cryptocurrency firm established by Cameron and Tyler Winklevoss, misled investors about the significant risks linked to its lending service in collaboration with Genesis. Marketed as Gemini Earn, the program falsely portrayed itself as a low-risk investment opportunity, allowing customers to lend their crypto assets to Genesis while earning interest payments with potential rates as high as 8%.
Attorney General Letitia James stated, "These cryptocurrency companies deceived investors, leading to detrimental consequences for middle-class investors." Among the 230,000 investors who experienced financial losses, at least 29,000 were New Yorkers, as per James.
James' lawsuit represents the most recent attempt by US officials to regulate the trillion-dollar crypto industry, which has long operated outside the realm of traditional financial oversight. Advocates of cryptocurrencies contend that regulators have been slow to establish clear regulations for these digital assets, asserting that they differ substantially from traditional securities such as stocks and bonds.
Losses pile up
Tyler Winklevoss, left, co-founded Gemini Trust with his twin brother, Cameron Winklevoss, right.
After the FTX crash, Genesis temporarily halted customer redemptions in its lending division due to the unstable market conditions. Eventually, the lending division had to declare bankruptcy.
Gemini was aware of the risky nature of Genesis loans and their close association with Bankman-Fried's crypto trading company, Alameda Research, as indicated in the recent lawsuit. Bankman-Fried is presently facing trial in a federal court in New York where he has pleaded not guilty to seven fraud and conspiracy charges. James claimed that Gemini concealed the investment risks associated with Genesis, while Genesis itself deceived the public regarding its losses.
The lawsuit also names former Genesis CEO Soichiro "Michael" Moro and Digital Currency Group CEO Barry Silbert.
Caroline Ellison, the former CEO of Alameda Research LLC, was seen leaving the court in New York, United States, on Thursday, October 12, 2023. In her testimony to a New York jury on Wednesday, Ellison, who was previously involved with FTX co-founder Sam Bankman-Fried, detailed her collaboration with him in deceiving lenders and customers to establish his multi-billion dollar cryptocurrency empire, as well as their unsuccessful efforts to avert a dramatic downfall.
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Sam Bankman-Fried's defense is further complicated by hidden audio recordings, a crucial witness, and allegations of involvement with Thai prostitutes. The Winklevoss twins, owners of Gemini, stated that Genesis had a debt exceeding $900 million to approximately 340,000 customers enrolled in the Earn program.
The AGs lawsuit is a response to another civil action initiated by the Securities and Exchange Commission. In January, the SEC sued Genesis and Gemini for offering unregistered securities through the Earn product.
Gemini issued a statement on X (formerly Twitter) on Thursday, asserting that they were the victims of a significant fraud.
The lawsuit filed by the NY AG confirms our long-standing claims that Gemini, its customers, and other creditors were deceived regarding Genesis finances. However, the company strongly disagrees with the lawsuit, stating it completely opposes it. The act of blaming a victim for being defrauded and misled is illogical, and we eagerly anticipate the opportunity to defend ourselves against this contradictory stance.
Genesis and DCG didnt immediately respond to a request for comment.
