NY Attorney General Reveals $3 Billion Fraud, Leading to the Collapse of the Winklevoss Twins’ Cryptocurrency Empire
New York Attorney General Letitia James has tripled her initial fraud claims against cryptocurrency firms Gemini, Genesis Global Capital, and Digital Currency Group (DCG) in an ongoing lawsuit. James filed an amended complaint on Friday, expanding the lawsuit to $3 billion.
In October, James initially filed a $1.1 billion lawsuit against the companies, but claims that more victims have since come forward. The amended complaint accuses Gemini, founded by the Winklevoss twins, of misleading investors. The cryptocurrency exchange allegedly assured investors that their money was safe in a program called Gemini Earn, conducted in partnership with Genesis. However, the lawsuit alleges that Genesis’ loans were risky and heavily tied to FTX founder Sam Bankman-Fried’s crypto hedge fund, Alameda Research. Gemini allegedly knew about this but failed to inform investors.
With the emergence of more victims, the Attorney General argues that false assurances about fund safety led to additional losses amounting to $2 billion. The overall fraud is now estimated to have impacted over 230,000 investors, resulting in losses surpassing $3 billion. The lawsuit not only targets Gemini but also includes former Genesis CEO Soichiro Moro and DCG founder and CEO Barry Silbert.
DCG responded to the lawsuit, dismissing it as baseless and expressing confidence in winning in court. The company maintains that it has always conducted its business lawfully and with integrity. Genesis, on the other hand, filed for bankruptcy in January 2023. The company has recently reached a settlement with the New York Attorney General’s office, agreeing to pay fraud claims upon fully repaying customers through the Chapter 11 bankruptcy process. This settlement is awaiting approval from a bankruptcy judge.
Both Genesis and Gemini also face legal challenges from the U.S. Securities and Exchange Commission (SEC). The SEC alleges that they bypassed disclosure requirements intended to protect Gemini Earn customers. Genesis has recently agreed to a $21 million fine with the SEC, contingent on repaying customers first. Gemini has also initiated legal action against DCG, citing issues related to their crypto-lending partnership.
According to the New York Attorney General, this legal battle underscores the need for stronger cryptocurrency regulations to safeguard the interests of investors.