NYAG Triples Fraud Estimate in DCG Lawsuit to $3 Billion

New York Attorney General Letitia James has massively expanded her lawsuit against Digital Currency Group (DCG) for allegedly defrauding hundreds of thousands of investors in its relationship with Genesis and Gemini Earn.

In an amended filing with the Supreme Court of New York on Friday, the AG accused both firms – alongside DCG CEO Barry Silbert and ex-Genesis CEO Soichiro Moro – of “defrauding additional individuals and institutions of an additional $2 billion.”

Genesis Fraud: Bigger Than Expected

Back in October, the AG charged Gemini, DCG, and Genesis for misleading investors about the risks associated with the Gemini Earn platform, which promised to produce a ‘low-risk’ yield for investors who deposited their crypto.

Genesis, which managed Gemini Earn customers’ deposits, went bankrupt last year, losing Gemini customers’ money as a consequence.

Though the fraud claim stood at $1 billion at the time, Friday’s amendment said that far more investors were damaged than previously thought, bringing the figure up to $3 billion.

In an accompanying statement on Friday, James said:

“After months of false promises, we pulled the curtain back and revealed that DCG was lying to investors and defrauding them out of billions. 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.”

Whereas October’s claim focused on harm caused to retail investors, Friday’s amendment included new input from institutional investors who contributed money directly to Genesis.

Genesis was but one crypto firm to implode due to massive exposure to both FTX and Alameda Research, Sam Bankman-Fried’s former exchange and hedge fund through which he stole over $10 billion from customers and creditors.

NYAG’s Crypto Experience

Attorney General James is hardly inexperienced with cracking down on the crypto industry. Dating back to early 2021, the AG directed Bitfinex and Tether to end all trading activity in New York. She also directed all unregistered crypto-lending platforms to cease illegal operations within the state.

In 2023, the AG secured $23 million from Nexo for such illegal operations, while also levying fraud charges against bankrupt crypto lender Celsius.

James was one of the first major American politicians to allege that Ether (ETH) is an unregistered security in her lawsuit against KuCoin last year. The U.S. Securities and Exchange Commission (SEC) has not given a clear verdict for its views on ETH’s regulatory status.