New York Attorney General Letitia James expanded the state’s case against Digital Currency Group on Friday with allegations that the firm defrauded investors out of $3 billion, rather than the $1 billion alleged by an initial lawsuit in October.
The amended complaint comes after more investors came forward following the initial suit, which accused DCG, founder and CEO Barry Silbert, DCG subsidiary Genesis Global Capital, its former CEO Soichiro Moro, and crypto exchange Gemini Trust Co. of misleading investors of their joint Gemini Earn program. Gemini Earn purported to allow customers to earn as much as 7.4% APY by lending their crypto to institutional borrowers.
The Gemini Earn program operated from December 2020 to November 2022, when the crypto world was thrown into a tailspin following the collapse of the crypto exchange FTX. Genesis filed for bankruptcy last January.
The initial suit focused largely on investor losses from the Gemini Earn program, while the updated lawsuit reflects the “complicated nature of the fraud also swindled other investors who contributed their money directly to DCG’s affiliate Genesis,” according to the Office of the Attorney General.
“After months of false promises, we pulled the curtain back and revealed that DCG was lying to investors and defrauding them out of billions,” said James in a prepared statement.
James alleges that all in, DCG, Genesis, and Gemini defrauded more than 230,000 investors.
“The fraud and deceit were so expansive that many additional people have come forward to report similar harm. This illegal cryptocurrency scheme, and the horrific financial losses that real people have suffered, are yet another reminder of why stronger cryptocurrency regulations are needed to protect all investors,” she said.
In a letter to DCG shareholders shared by CoinDesk Monday, DCG said of the lawsuit, “there is nothing new here.”
“This is the same baseless complaint recirculated to generate another round of press headlines,” the letter said. “DCG has always conducted its business lawfully and with integrity.”
In the same letter to shareholders, DCG said its year-over-year revenue jumped 59% as crypto prices continue to rally. Additionally, it alleged that Genesis’ recently filed amended bankruptcy plan and a proposed settlement with the NYAG was “devised this proposed settlement without notice to DCG to circumvent bankruptcy law and allow creditors to get paid more than the legally-allowed value of their claims,” the company wrote. “We will continue to fight this attempt to undermine the law.”
