New York Attorney General Letitia James has amended her lawsuit against Digital Currency Group (DCG) and its affiliate Gemini Trust Co., increasing the damages claim to $3 billion.
The extended lawsuit was filed just hours after Genesis Global reached a settlement with New York over allegations it defrauded customers through its terminated Gemini Earn program. The settlement reflects claims from more than 230,000 investors, indicating the scale of the alleged fraud is much larger than previously thought, according to recent court filings.
The lawsuit originally sought $1.1 billion last October, but that figure was increased following new investor testimony about misleading assurances about the safety of their investments.
The legal action does not bring new charges against Gemini, but focuses on claims that Gemini and its DCG unit, Genesis Global Capital, failed to inform investors about the risks associated with a cryptocurrency lending program that launched in 2021. The program’s downfall coincided with a major bankruptcy. Within the cryptocurrency industry, including the collapse of FTX, led by Sam Bankman-Fried.
What is the lawsuit against Gemini and Genesis?
The Gemini Earn program was a collaboration between Gemini and Genesis. It reportedly offered customers interest rates of up to 8% on cryptocurrency asset loans.
But the state’s lawsuit alleges that significant investments were made in unsafe ventures, including the bankrupt Three Arrows Capital and Babel Finance, which lost more than $100 million, significantly impacting Genesis’ financial stability.
The suit also alleges that Gemini, founded by the famous Winklevoss twins, failed to fully disclose the risks associated with its loans. In particular, they failed to highlight that much of the third-party lending was made to Alameda Research, owned by Sam Bankman-Fried.
This led to further accusations that Genesis and DCG were trying to hide the extent of their financial difficulties from investors.