Gemini and DCG Face Lawsuit from New York Law Enforcement Agencies! Alleged Failure to Disclose Financial Risks and Suspected Fraud Involving $1.1 Billion of Users’ Funds.
Gemini and DCG, which were affected by the bankruptcy of 3AC last year, have recently been sued by New York law enforcement agencies. The prosecution alleges that both companies failed to disclose the risks faced by investors, and are suspected of defrauding hundreds of millions of dollars from users.
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Gemini and DCG sued by New York law enforcement agencies
Gemini and DCG both deny the allegations
According to Bloomberg’s report, Gemini Trust Company, Grayscale, and Genesis’ parent company DCG (Digital Currency Group) have been sued by New York law enforcement agencies for allegedly defrauding users of $1.1 billion.
New York Attorney General Letitia James accused Gemini exchange and DCG’s Genesis Global Capital division on Thursday for failing to disclose the risks associated with their cryptocurrency lending program to investors. It alleges that Gemini deceived users in its partnership with Genesis regarding the risk loans and failed to disclose that nearly 60% of the third-party loans were provided to Alameda. Genesis and DCG also attempted to conceal increasing asset losses.
In a statement, Letitia James said, “This is another example of bad actors causing harm in the underregulated cryptocurrency industry.”
Letitia James further pointed out that Genesis failed to conduct a thorough audit of 3AC and falsely claimed to Gemini that it had “regularly reviewed the financial condition of its borrowers.”
Additionally, after Gemini discovered financial risks with Genesis in July last year, it considered shutting down the Gemini Earn program. Its COO and risk manager 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 a meeting in October last year, where Barry Silbert, CEO of DCG, informed Gemini co-founder Cameron Winklevoss of Genesis’ need to declare bankruptcy to return assets to Gemini. As a result, Gemini secretly extended Genesis’ repayment deadlines multiple times.
In these charges, Letitia James hopes to ban Gemini, Genesis, and DCG from the financial investment industry in New York. She also seeks compensation for investors and the recovery of the ill-gotten gains of these companies.
DCG has denied the allegations, stating, “We are surprised by the complaint and have no evidence to suggest that DCG, Barry Silbert, or its employees engaged in any wrongdoing.”
Gemini, on the other hand, stated on Twitter that the accusations from the New York Attorney General confirm that Gemini, Earn program users, and other creditors were victims of a large-scale fraud. After all, Gemini filed a lawsuit against DCG and Barry Silbert for financial statement conspiracy as early as July this year.
However, Gemini also stated that the accusations of victim-blaming and false statements are baseless, and they look forward to defending themselves against this inconsistent position.
(Related report: Exchange Gemini files lawsuit against Genesis’ parent company DCG and founder Barry Silbert for financial statement conspiracy)
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