New York Attorney General Letitia James today filed an amended complaint, expanding the Office of the Attorney General’s (OAG) lawsuit against Digital Currency Group, Inc. (DCG), DCG’s CEO, Barry Silbert, and Genesis Global Capital, LLC and its affiliates’ (Genesis) former CEO, Soichiro Moro, for defrauding additional individuals and institutions of an additional $2 billion. This amended complaint is the result of more investors coming forward following Attorney General James’ October 2023 suit against Gemini Trust Company (Gemini), Genesis and DCG for misleading representations to investors about an investment program called Gemini Earn and causing over $1 billion in losses. The OAG’s continued investigation revealed that these additional investors were similarly defrauded and provided with false assurances that their funds were safe when in fact they were not, leading to an additional $2 billion in assets that were lost. In total, OAG found that these companies defrauded more than 230,000 investors out of more than $3 billion.
“After months of false promises, we pulled the curtain back and revealed that DCG was lying to investors and defrauding them out of billions,” said Attorney General James. “The fraud and deceit were so expansive that many additional people have come forward to report similar harm. This illegal cryptocurrency scheme, and the horrific financial losses that real people have suffered, are yet another reminder of why stronger cryptocurrency regulations are needed to protect all investors.”
In October 2023, Attorney General James filed a sweeping lawsuit against cryptocurrency companies Gemini, Genesis, and DCG for defrauding investors out of more than $1 billion. This suit was the result of an OAG investigation that found that Gemini lied to investors about an investment program it ran with Genesis called Gemini Earn. Gemini repeatedly assured investors that investing with Genesis through their Gemini Earn program was a low-risk investment. However, the OAG investigation uncovered that Gemini’s internal analyses of Genesis showed that the company’s financials were risky. Additionally, OAG found that after losing more than $1.1 billion on loan defaults, Genesis, DCG, and their executives tried to conceal their losses by entering into a $1.1 billion promissory note, in which DCG agreed to pay Genesis $1.1 billion in a decade at only a one percent interest rate. The lawsuit states that DCG, through Genesis, used the promissory note as part of a scheme to defraud investors and the public about Genesis’ financial condition and its ability to operate its business.
Since that lawsuit was filed, additional investors have come forward to share their experiences and their losses due to the scam perpetrated by DCG through Genesis. While the initial suit focused largely on the losses of retail investors participating in the Gemini Earn investment program, as more complaints have been made, it became clear that the complicated nature of the fraud also swindled other investors who contributed their money directly to DCG’s affiliate Genesis. As a result of these complaints, OAG filed the amended complaint and is now seeking more than $3 billion in restitution for defrauded investors.
Today’s amended lawsuit is the latest action taken by Attorney General James to rein in the cryptocurrency industry and protect investors. Attorney General James announced sweeping cryptocurrency legislation that will increase regulations of the cryptocurrency industry to protect New York investors. In October 2023, Attorney General James filed the initial complaint against Gemini, Genesis, and DCG for defrauding investors and perpetrating a scam. In June 2023, Attorney General James recovered more than $1.7 million from CoinEx for failing to register as a securities and commodities broker-dealer and for falsely representing itself as a crypto exchange. In May 2023, Attorney General James secured $4.3 million from Coin Cafe for failing to register as a commodity broker-dealer and defrauding investors. In January 2023, Attorney General James and a multistate coalition recovered $24 million from the cryptocurrency platform Nexo for operating illegally. Attorney General James also sued the former CEO of Celsius for defrauding investors and concealing the company’s dire financial condition. In March 2022, Attorney General James issued a taxpayer notice to virtual currency investors and their tax advisors to accurately declare and pay taxes on their virtual investments.
In October 2021, Attorney General James directed unregistered crypto lending platforms to cease operations for not registering with the state. In September 2021, Attorney General James and the U.S. Securities and Exchange Commission recovered $479.9 million from GTV Media for failing to register cryptocurrency sales. Also in September 2021, Attorney General James secured a $3 million court judgment against Coinseed. In February 2021, Attorney General James required Bitfinex and Tether to end all trading activity in New York and required iFinex and Tether and their related companies to pay $18.5 million in penalties.
Attorney General James urges New Yorkers who have been affected by deceptive conduct in virtual asset markets to report these issues to OAG. Attorney General James also encourages workers in the cryptocurrency industry who may have witnessed misconduct or fraud to file an online whistleblower complaint with her office, which can be done anonymously.
This lawsuit is being handled by Assistant Attorneys General Geoffrey Andreu and John Ruth and Senior Enforcement Counsel Gabriel Tapalaga of the Investor Protection Bureau, with assistance from Principal Accountant Shalendra Ramadhin, Legal Assistant Eddie Aguilar, and Legal Extern Viktoryia Bick also of the Investor Protection Bureau, and Detective Investigator Frank Tirri of the Investigations Division. Complex data analysis was provided by Data Analyst Anushua Choudhury of the Division of Research and Analytics, which is led by Director Gautam Sisodia. The Investor Protection Bureau is led by Bureau Chief Shamiso Maswoswe and Deputy Bureau Chief Kenneth Haim and is a part of the Division for Economic Justice, which is overseen by Chief Deputy Attorney General Chris D’Angelo. The Division of Economic Justice is led by First Deputy Attorney General Jennifer Levy.
