Gemini and DCG, which were affected by the bankruptcy of 3AC last year, have recently been sued by law enforcement authorities in New York. The prosecutors allege that both companies failed to disclose the risks faced by the company to investors, and are suspected of defrauding users of hundreds of millions of dollars.
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Gemini and DCG sued by New York law enforcement
Gemini and DCG both deny the charges
According to Bloomberg’s report, Gemini Trust Company and DCG (Digital Currency Group), the parent company of Grayscale and Genesis, have been sued by law enforcement authorities in New York for allegedly defrauding users of $1.1 billion.
New York Attorney General Letitia James accused the Gemini exchange and DCG’s Genesis Global Capital division on Thursday of failing to disclose the risks faced by their cryptocurrency lending program to investors. She pointed out that Gemini deceived users in its collaboration with Genesis regarding risky loans and failed to disclose that nearly 60% of third-party loans were provided to Alameda. Genesis and DCG attempted to conceal increasing asset losses.
In a statement, Letitia James stated, “This is another example of bad actors causing harm in the under-regulated cryptocurrency industry.”
Letitia James further pointed out that Genesis failed to adequately audit 3AC and falsely claimed to Gemini that it had “regular reviews of the financial condition of its borrowers.”
In addition, Gemini considered shutting down the Gemini Earn program after discovering Genesis’s financial risks in July last year. Its COO and Risk Manager also withdrew their investments in the Earn program between June and September last year. However, the program was ultimately not shut down, and no warnings about the related risks were disclosed to investors.
The charges also mentioned that during a meeting in October last year, Barry Silbert, CEO of DCG, informed Gemini co-founder Cameron Winklevoss of Genesis’s need to declare bankruptcy to return Gemini’s assets. As a result, Gemini secretly extended Genesis’s repayment deadlines multiple times.
In this lawsuit, Letitia James hopes to prohibit Gemini, Genesis, and DCG from entering New York’s financial investment industry. She also seeks compensation for investors and the recovery of ill-gotten gains allegedly obtained by these companies.
DCG has denied the allegations, stating, “We were blindsided by the complaint and have no evidence that DCG, Barry Silbert, or any of our employees engaged in any improper conduct.”
Gemini, on the other hand, tweeted on Twitter that the allegations from the New York Attorney General confirmed that Gemini, Earn program users, and other creditors were victims of a large-scale fraud. After all, Gemini had filed a lawsuit against DCG and Barry Silbert for financial statement fraud as early as July this year.
However, in response to being sued themselves, Gemini stated, “Accusing the victims of fraud and false statements is baseless, and we look forward to defending ourselves against this inconsistent position.”
(Related report: Exchange Gemini files lawsuit against Genesis parent company DCG and founder Barry Silbert for financial statement fraud)
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Further reading:
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