New York’s top legal authority launched a lawsuit against well-known cryptocurrency entities, Gemini Trust Company and Genesis, alleging deceptive practices that resulted in colossal financial losses for investors. The accusations pinpoint over a billion dollars lost, attributed to fraudulent actions and misinformation provided by these firms.
Gemini Trust Company, conceptualized and spearheaded by Tyler and Cameron Winklevoss, figures prominently in the early history of Facebook. The lawsuit posits that the Winklevoss twins’ company deluded investors regarding the inherent risks associated with injecting funds into a particular investment scheme. This scheme centered around loans, and a significant chunk of these funds was channeled into Sam Bankman-Fried’s Alameda research trading firm.
New York attorney General Letitia James commented on the situation, emphasizing the severity of the betrayal to investors. She remarked, “Investors from various parts of the nation incurred a staggering loss exceeding a billion dollars. This financial setback was the direct outcome of being presented with deceptive narratives. They were led to believe that their investments in Gemini Earn would not only remain secure but also appreciate over time.”
Gemini had rolled out an initiative, dubbed the ‘Gemini Earn programme’, which pitched an attractive proposition to potential investors. They were offered an opportunity to lend their cryptocurrency holdings in return for promising, high yields. Some of these loans were forwarded to Genesis, a platform specializing in digital currency services. This platform subsequently channeled these cryptocurrencies to various participants within the industry.
However, the equilibrium was disrupted when Bankman-Fried’s Alameda Research and the FTX platform declared bankruptcy. This unexpected move sowed seeds of panic in the already volatile market. Bankman-Fried is presently embroiled in a legal battle in New York, defending himself against allegations of fraud.
Genesis, swamped by an overwhelming volume of withdrawal requests it couldn’t fulfill, was compelled to seek bankruptcy protection earlier this year. The attorney general highlighted, “While Gemini concealed the perilous nature of investing with Genesis, Genesis, on the other hand, presented a fabricated account of its financial health to the public.” Records from that period suggest that Gemini had forwarded loans amounting to approximately US$765 million to Genesis.
The lawsuit also brings to light accusations against Soichiro Moro, the erstwhile CEO of Genesis, and its parent organization, DCG. It claims that attempts were made to obfuscate the scale of the financial losses.
In response to these serious allegations, Gemini took to the social media platform X (previously known as Twitter), asserting its position as a victim rather than a perpetrator. They expressed their intent to robustly defend their stance and highlighted the inconsistency of the blame directed towards them.
DCG, on its part, vehemently denied any wrongdoing. Barry Silbert, the CEO and founder of DCG, expressed his astonishment at the claims made in the attorney general’s lawsuit and asserted their commitment to challenging these allegations in court. The ongoing litigation seeks punitive measures, including a ban on all accused parties from operating within New York’s financial domain and mandatory compensation to aggrieved investors.