New York sues crypto firms for losing over $1 billion

Illustration by Alex Castro / The Verge

New York Attorney General Letitia James is suing three cryptocurrency companies — Gemini, Genesis, and Digital Currency Group (DCG) — over claims they misled investors, leading to the loss of over $1 billion. In a lawsuit filed on Thursday, James says their alleged fraudulent schemes affected over 230,000 investors.

The lawsuit targets Gemini, the crypto exchange owned by Cameron and Tyler Winklevoss, and its Earn program. The firm marketed Gemini Earn as a high-yield program that involved customers investing with Genesis Global Capital, which is owned by DCG. However, James alleges that Gemini knew investing with Genesis was risky and misled customers as a result.

Last November, Gemini paused withdrawals from its Earn program in the wake of the FTX collapse, preventing customers from accessing their funds. The New York Post reported in September that the Winklevoss twins allegedly withdrew $280 million from Genesis before the firm ultimately collapsed.

Additionally, James is suing Genesis and its DCG parent company for allegedly trying to cover up over $1 billion in losses. James is seeking to ban Gemini, Genesis, and DCG from the investment industry in New York. She also wants the firms to “pay damages, restitution, and disgorgement of all funds and cryptocurrencies” that they earned as part of their alleged schemes.

“These cryptocurrency companies lied to investors and tried to hide more than a billion dollars in losses, and it was middle-class investors who suffered as a result,” James says in a statement. “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.”

This isn’t the only legal trouble that Genesis and Gemini are facing. Last year, an investor sued Gemini for allegedly failing to protect customers from the theft of $36 million in crypto. The Securities and Exchange Commission also sued both firms in January over claims they sold unregistered securities.

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