The New York Attorney General’s Office (NYAG) has recently expanded its fraud claims against Digital Currency Group (DCG) and related parties. Initially alleging over $1 billion in losses, the NYAG has now amended the lawsuit to include an additional $2 billion, bringing the total to a staggering $3 billion. These alleged losses are said to have affected more than 230,000 investors. This update comes after months of investigation, where the NYAG claims to have uncovered a web of lies and deceit orchestrated by DCG to defraud investors.
New York Attorney General Letitia James has stated that “DCG was lying to investors and defrauding them out of billions.” The scope of the fraud was so extensive that it prompted many additional individuals to come forward and report similar harm. The amended complaint filed by the NYAG, which includes DCG CEO Barry Silbert, DCG subsidiary Genesis Global Capital, and former Genesis CEO Soichiro Moro, is a direct result of these investors’ testimonies. Despite reports of a settlement between Genesis and the NYAG, the recent update from the Attorney General’s office does not mention any agreement, and it is unclear how it would apply to the increased amount.
The lawsuit initiated by the New York Attorney General’s office began in October 2023, targeting DCG, Genesis, and their independent partner Gemini. The case revolves around Gemini Earn, a crypto lending service advertised as low-risk by Gemini. However, the NYAG discovered that the company’s financial situation posed significant risks. The lawsuit alleges that Genesis and DCG executives attempted to conceal losses through a $1.1 billion promissory note, which outlined repayment terms over a decade. According to the NYAG, this note and the concealment of losses were part of a larger scheme to defraud investors and the public.
SEC’s Involvement and Settlement
In addition to the NYAG’s actions, the Securities and Exchange Commission (SEC) has also taken legal steps against Genesis. As a result, a conditional $21 million settlement has been reached. However, Genesis will only be required to pay this amount if it cannot fully compensate its customers through its ongoing bankruptcy proceedings.
The recent update from the NYAG sheds light on the scale of the alleged fraud committed by Digital Currency Group and its affiliates. The increased losses of $2 billion, combined with the involvement of an extensive number of individual investors, paint a troubling picture. As the legal proceedings continue, it remains to be seen how the case will unfold and what repercussions will be faced by those implicated in the wrongdoing. For now, the investigation serves as a stark reminder of the importance of due diligence and transparency in the cryptocurrency industry. Investors must exercise caution and thoroughly analyze the credibility and legitimacy of entities operating in this rapidly evolving market to safeguard their investments.