New York Attorney General Sues Gemini Trust, Genesis Global, and DCG for Defrauding Customers
New York Attorney General Letitia James has filed a complaint against popular crypto exchange Gemini, crypto lending firm Genesis, and crypto investment company Digital Currency Group (DCG).
The lawsuit also targets two executives, former Genesis CEO Michael Moro and DCG CEO Barry Silbert, alleging that the duo was involved in fraudulent schemes that defrauded customers, according to a report by Axios.
The complaint argues that Gemini provided funds to Genesis as part of its Earn program, which were subsequently lent out to counterparties such as Three Arrows Capital and Alameda.
However, when multiple bankruptcies occurred within the industry, resulting in defaults to Genesis, the company found itself facing a staggering $1 billion hole.
The lawsuit accuses DCG of attempting to cover up these losses by falsely claiming to have absorbed them, when in reality, it had only issued a promissory note to its subsidiary Genesis.
The lawsuit also claims that Gemini made false assurances regarding the overcollateralization of Genesis' loans.
According to data shared by her office, between December 2020 and September 2022, Genesis' loans were only 60-90% collateralized, contrary to Gemini's claims.
The complaint added that Gemini's risk management team identified in May 2021 that Genesis was highly leveraged and had low liquidity.
By February 2022, the team projected a potential 50-60% default rate in the event of a market downturn and compared Genesis' financials to companies with a credit rating of CCC, indicating a significant credit risk.
Furthermore, the complaint reveals that Genesis' CFO instructed employees not to disclose the promissory note to Gemini, and the company actively concealed and suppressed information regarding
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