Gemini, Genesis, and DCG Face Lawsuit from NY Attorney General Over Alleged Fraud

New York Attorney General Letitia James has taken legal action against renowned crypto entities: the Gemini exchange, the crypto loan provider Genesis, and the crypto investment group Digital Currency Group (DCG). Additionally, former Genesis CEO Michael Moro and DCG CEO Barry Silbert are pinpointed for their supposed roles in deceptive practices which allegedly defrauded customers, as detailed by Axios.

The lawsuit delves into Gemini’s financial dealings, stating that it channeled funds to Genesis through its Earn program. These funds were then loaned to parties like Three Arrows Capital and Alameda. When a series of industry bankruptcies led to Genesis defaults, the company faced an astounding $1 billion shortfall.

DCG is charged with concealing these losses under the guise of absorbing them. In truth, they only provided a promissory note to Genesis, their subsidiary.

Moreover, Gemini has been accused of misleading about the full collateral backing of Genesis loans. Data presented by the Attorney General’s office reveals that from December 2020 to September 2022, these loans were backed by merely 60-90% collateral, in contradiction to Gemini’s assertions.

By February 2022, Gemini’s risk management foresaw a potential default rate of 50-60% if the market took a downturn. They even paralleled Genesis’ financial standing to firms rated CCC in creditworthiness, hinting at a considerable credit peril.