New York Attorney General Letitia James on Monday announced a landmark settlement on Thursday, revealing that her office has secured $2 billion from Genesis Trading for defrauding investors.
What Happened: This settlement, the largest against a cryptocurrency company in New York’s history, not only mandates restitution for the affected investors but also bans Genesis Trading from operating in the state.
In 2023, James accused Gemini Trust, Genesis Capital and Digital Currency Group of engaging in a $1 billion fraud scheme.
The lawsuit alleged that these major players in the digital asset industry deceived investors and hid significant losses, according to New York Times.
The lawsuit targeted the Winklevoss twins’ exchange, Gemini Trust; the lender, Genesis Capital; and its parent company, Digital Currency Group.
According to the lawsuit, Gemini misled investors about the risks associated with Gemini Earn, a program developed in collaboration with Genesis that promised up to 8 percent returns for lending cryptocurrency to Genesis.
The collapse of the cryptocurrency exchange FTX led by Sam Bankman-Fried, severely impacted Genesis, causing it to freeze accounts amid a decline in digital asset values.
This left Earn investors unable to retrieve hundreds of millions of dollars’ worth of cryptocurrency.
Attorney General James’ lawsuit cited internal Gemini documents revealing that the company’s risk analysis teams had deemed Genesis highly risky and leveraged with limited liquidity shortly after Earn’s inception in 2021.
Despite this knowledge, Gemini failed to inform investors, leaving 29,000 New Yorkers and hundreds of thousands of others nationwide unaware of the risks to their assets.
The lawsuit further alleged that Genesis and Digital Currency Group attempted to conceal Genesis’ financial troubles from Gemini and Earn investors. The firms are accused of entering into a $1.1 billion, 10-year promissory note to create the false impression of financial stability and encourage continued investment in the Earn program.
In January 2023, the Securities and Exchange Commission charged Gemini and Genesis with offering unregistered securities and raising billions of dollars in digital assets without proper disclosures.
Gemini also faces multiple class-action lawsuits from Earn investors.
What’s Next: These developments will be closely examined at Benzinga’s Future of Digital Assets event on November 19, where industry leaders, investors, and policymakers will discuss the evolving role of digital assets in the global financial system.
Read Next: Donald Trump’s Election Odds Just Spiked To 51% According To This Crypto Prediction Market
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