New York Attorney General Letitia James recently made an official announcement indicating that her office is taking Gemini, Genesis, and their parent company Digital Currency Group to court.
The companies are accused of misleading more than 23,000 investors, of which around 29,000 are New York residents, out of over $1 billion through the Gemini Earn investment program, which was run collaboratively by Gemini and Genesis.
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According to the Attorney General's findings, Gemini misled its customers about the risk associated with the investment program. Although the company promoted it as a low-risk venture, subsequent investigations found that Genesis' financials were, in fact, unsafe.
The lawsuit alleges that Gemini knew Genesis' loans were undersecured and at one point highly concentrated with one entity, Sam Bankman-Fried's Alameda, but did not reveal this information to investors.
Additionally, the lawsuit aims to hold Genesis, its former CEO Soichiro Moro, and parent company Digital Currency Group, headed by CEO Barry Silbert, accountable for obscuring more than $1.1 billion in investment losses.
The lawsuit is not just seeking financial restitution and the return of what it terms "ill-gotten gains," but also aims to prohibit all three companies from further financial investment activities in New York.
Letitia James underscored the impact on "middle-class investors," stating:
Hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn.
She also expressed concern about the broader implications for the cryptocurrency industry, labeling it "another example of bad actors causing harm throughout the under-regulated cryptocurrency industry."
It's worth noting that this is not the first time that Genesis and Gemini have found themselves under legal scrutiny. Both companies were subject to a lawsuit filed by the United States Securities and Exchange Commission in January 2023, alleging the offering of unregistered securities via the Gemini Earn program.
The lawsuit initiated by the New York Attorney General may bring severe consequences for Gemini, Genesis, and Digital Currency Group, including potential bans from operating in New York's financial investment industry. As the case unfolds, it serves as a crucial reminder of the risks involved in cryptocurrency investments, urging investors to exercise caution.
