The prosecutor’s office accuses Gemini, Genesis and Digital Currency Group of defrauding investors

New York State prosecutors have sued Gemini, Genesis and Digital Currency Group (DCG), as well as the companies’ top managers, accusing them of defrauding about 200,000 investors. According to the department, the amount of damage exceeds $1 billion.

Investigators believe that the popular crypto exchange Gemini deliberately provided its clients with incorrect information about the Earn staking program, which it organized in collaboration with Genesis. The latter has repeatedly voiced information about the low risks of the promoted product.

The Winklevoss brothers’ company gave the money to Genesis, which in turn used it to make loans to Three Arrows Capital and Alameda Research. Gemini knew that these loans were under-secured and the lender’s financial performance was assessed as unsatisfactory. However, this information was hidden from investors, investigators say.

Genesis, its former boss Shichiro Moro, parent company DCG and its head Barry Silbert were accused of fraud and concealing large investor losses. The company lost a significant share of this amount due to the collapse of Three Arrows Capital last summer.

Law enforcement officers believe that the company did not conduct a quality audit of the financial situation of borrowers. She also misled Gemini about the ongoing monitoring of loan collateral.

Top managers of DCG structures found themselves in collusion, trying to hide losses from Gemini, Earn investors and the crypto community. The parent company agreed to issue Genesis notes in the amount of $1.1 billion at 1% per annum and with a ten-year maturity. The prosecutor’s office claims that the debt obligations turned out to be part of a fraudulent scheme.

It is reported that Genesis, after the liquidation of Three Arrows Capital, repeatedly sent the Winklevoss brothers’ company false balance sheet reports, where the amount of the bill was indicated in current assets. This was a deliberate lie, since this category includes funds that can be converted into money and their analogues within 12 months.

Now the prosecutor’s office intends to prohibit the accused from engaging in business activities related to trading in securities. In addition, if the department wins in court, the defendants will have to compensate clients for losses and return illegally obtained profits.

“New Yorkers and investors across the country lost more than $1 billion because they were told outright lies that their investments in Earn were safe and would grow. Instead, Gemini hid the risks of investing in Genesis, and Genesis lied about its losses,” said state Attorney General Letitia James.

Previously, she achieved a ban on the operation of the CoinEx crypto exchange in New York. Local authorities also confiscated $1.7 million in company assets.