New York Attorney General Letitia James announced Friday that she is expanding her lawsuit against cryptocurrency firms Gemini, Genesis Global Capital and its parent company, Digital Currency Group (DCG), for allegedly defrauding investors, tripling the total fraud claims against the firms to $3 billion.
James filed a $1.1 billion lawsuit against the companies in October and says that more victims have come forward since then.
The New York AG claims that Gemini, founded by billionaire twins Cameron and Tyler Winklevoss – best known for suing Meta CEO Mark Zuckerberg over Facebook's early days – "lied to investors" by assuring them their investments were safe in the Gemini Earn program it ran with now-bankrupt Genesis.
However, the suit alleges, Genesis' loans were actually risky, because at one point they were "highly concentrated" with FTX founder Sam Bankman-Fried's crypto hedge fund Alameda Research, which Gemini purportedly knew and did not disclose.
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The attorney general said it had become clear as more investors came forward that "the scam perpetrated by DCG through Genesis" also ensnared investors who sent money directly to Genesis and were falsely assured that their money was safe.
Former Genesis CEO Soichiro Moro and DCG founder and CEO Barry Silbert were also named in the suit.
"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," James said in a statement.
Many of the additional investors were retail customers, the complaint said, including a chiropractor and a stay-at-home father who each invested $2 million of bitcoin with Genesis.
DCG said Friday that James' lawsuit was "baseless" and that it expects to win in court.
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"DCG has always conducted its business lawfully and with integrity, and DCG and Barry Silbert will be fully vindicated," it said in a statement.
Genesis is shutting down after filing for bankruptcy in January 2023.
Late Thursday, it reached a settlement with James' office, agreeing to pay on her fraud claims so long as it fully repays customers through the Chapter 11 process. That settlement requires a bankruptcy judge's approval.
Representatives for DCG and Gemini did not immediately respond to requests for comment.
Genesis filed for bankruptcy two months after halting withdrawals by Gemini Earn customers following the collapse of Bankman-Fried's FTX cryptocurrency exchange.
Both Genesis and Gemini were also sued by the U.S. Securities and Exchange Commission, which said they bypassed disclosure requirements meant to protect Gemini Earn customers.
Last week, Genesis agreed to pay the SEC a $21 million fine, also contingent on its repaying customers first.
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Gemini, meanwhile, has sued DCG over the failure of their crypto lending partnership.
Reuters contributed to this report.
