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NY attorney general: $3 billion cryptocurrency fraud case expands!


$3 billion cryptocurrency fraud case

New York Attorney General Letitia James has significantly escalated her legal battle against Digital Currency Group (DCG) and other cryptocurrency entities. In a notable move, she has expanded her lawsuit, alleging a fraud scheme exceeding $3 billion in damages.


Initially, James filed a lawsuit in October, targeting DCG, its Genesis Global Capital unit, and Gemini Trust, helmed by Cameron and Tyler Winklevoss. Her claim centered on accusations of misleading investors regarding the Gemini Earn program. This program purportedly allowed customers to lend cryptocurrency assets to Genesis in exchange for substantial returns.


According to James, the initial estimate of over $1 billion in losses has now ballooned as more affected investors have come forward. The expanded lawsuit alleges that DCG, operating through Genesis, deceived investors who directly entrusted funds to Genesis, falsely representing the safety of their investments.



Among the newly identified victims are retail investors, including individuals like a chiropractor and a stay-at-home father, each of whom purportedly invested $2 million in bitcoin with Genesis as reported by Reuters.


Seeking restitution, James aims to secure over $3 billion for the estimated 230,000 investors she believes fell victim to the alleged fraud. In a statement, she emphasized the necessity of robust cryptocurrency regulations to safeguard all investors from such illicit schemes.


DCG promptly responded to James' lawsuit, dismissing it as groundless and expressing confidence in their legal position. The company reiterated its commitment to conducting business lawfully and ethically, pledging full vindication for itself and its CEO, Barry Silbert.



Meanwhile, Genesis, the focal point of the lawsuit, has already initiated bankruptcy proceedings, filing for Chapter 11 protection in January 2023. In a recent development, the company reached a preliminary settlement with James' office, agreeing to address the fraud claims contingent upon fully repaying affected customers through the bankruptcy process, pending approval from the bankruptcy court.


Notably, DCG's CEO Barry Silbert and former Genesis CEO Soichiro Moro are also named as defendants in the lawsuit.



The legal entanglements extend beyond James' lawsuit. Both Genesis and Gemini faced legal action from the U.S. Securities and Exchange Commission (SEC), accused of bypassing disclosure requirements intended to safeguard Gemini Earn customers. Genesis recently reached a $21 million settlement with the SEC, subject to the condition of prioritizing customer repayment.


Gemini, on the other hand, has taken legal action against DCG, citing the failure of their crypto lending partnership as grounds for litigation.


11.02.2024



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