Gemini Trust, 2 Other Crypto Firms Sued Over $1 Billion 'Investor Fraud’ by New York State

Gemini Trust Company is facing a lawsuit filed by New York Attorney General Letitia James, who is concurrently prosecuting former President Donald Trump for fraud. Aside from this, Digital Currency Group (DGC) and Genesis Global Capital are also implicated in the suit.

Gemini Trust Company Facing Lawsuit Over Investor Fraud

Gemini Trust Company, a cryptocurrency exchange co-founded by Cameron Winklevoss and Tyler Winklevoss, has been hit with a lawsuit accusing it of defrauding investors.

Engadget reported that the lawsuit was filed on Thursday by Letitia James, who is concurrently prosecuting the former president on a wide range of fraud charges. Cryptocurrency firms DGC and Genesis Global Capital are also implicated in the suit.

The civil lawsuit asserted that these three entities collectively engaged in fraudulent activities that affected more than 230,000 investors, resulting in losses exceeding $1 billion.

The Attorney General has also pressed charges against former Genesis CEO Soichiro "Michael" Moro and DCG founder and chief Barry Silbert, accusing them of attempting to conceal the true financial state of their lending unit.

In the case involving the Winklevoss twins and their cryptocurrency exchange Gemini, the lawsuit claimed that the digital asset platform failed to adequately disclose the financial status of Genesis before establishing a partnership with the crypto exchange to create an investment platform named Gemini Earn in 2021.

The lawsuit further noted that in February 2022, Gemini adjusted its assessment of Genesis' credit rating, downgrading it from the investment-grade BBB to the less favorable CCC rating.

Importantly, this significant alteration in the credit rating was not publicly disclosed to investors, while Gemini continued to promote correlated investments as "low-risk."

Additionally, The Information reported that allegations have been raised that several of the company's risk assessors withdrew their own investments from Gemini Earn without disclosing this information to investors.

There are also claims that over 60 percent of Genesis' financial assets were intertwined with Sam Bankman-Fried's tarnished hedge fund, Alameda Research. That brings a striking parallel between the Gemini and Genesis connection and the well-documented ties between FTX and Alameda Research.

Addressing Allegations

In response, Axios reported that Gemini opted to address these allegations through the favored social media platform of the cryptocurrency community, X. The company vehemently denied any wrongdoing, saying it was simply the victim of fraud on the part of Genesis and DCG.

Notably, the firm refrained from commenting on its awareness of Genesis' precarious financial state and when it knew it. Instead, it put the blame on the Genesis CEO, Moro, and DCG founder, Silbert.

Gemini asserted that it was unreasonable to blame the victim in a fraud and deception scenario. It expressed its readiness to defend itself "against this inconsistent position."

Meanwhile, Silbert penned a robust statement, adamantly rejecting the allegations against him. He conveyed his surprise at what he deemed "baseless allegations in the Attorney General's complaint" and pledged to contest these claims in a court of law.

It is important to note that Genesis ceased all cryptocurrency trading just the previous month and had previously sought bankruptcy protection in January.

The ongoing lawsuit seeks to recover the $1 billion in losses, and it aims to ban all three companies from participating in financial activities in the state of New York.