- The NYAG has accused crypto giants DCG and Genesis of hiding losses and defrauding investors of $3 billion.
- The latest update has contradicted Bloomberg’s previous reporting of a settlement.
- The SEC has also fined Genesis $21 million, highlighting the growing scrutiny of crypto firms.
The New York Attorney General’s office has escalated its legal battle against prominent crypto firms Digital Currency Group (DCG) and its subsidiary Genesis Global Capital, tripling the alleged investor losses to $3 billion.
NYAG Escalates Crypto Fraud Case Against
The move comes just two days after Genesis seemingly reached a settlement with the NYAG, leaving observers confused about the current state of the legal proceedings.
The initial lawsuit, filed in October 2023, accused DCG, Genesis, and their partner Gemini of misleading investors about the risks associated with their “Gemini Earn” program, a crypto lending service advertised as low-risk.
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The NYAG alleged that the companies concealed significant financial risks and attempted to cover up losses through a $1.1 billion promissory note, calling it “part of a scheme to defraud investors and the public.”
Now, citing testimonies from over 230,000 impacted investors, the NYAG has amended its complaint, raising the damage claims from $1 billion to $3 billion.
Attorney General Letitia James denounced the companies' behavior, stating, “After months of false promises, we pulled the curtain back and revealed that DCG was lying to investors and defrauding them out of billions… The fraud and deceit were so expansive that many additional people have come forward to report similar harm.”
It was previously reported that Genesis had settled the NYAG lawsuit based on bankruptcy filings. However, the Attorney General’s latest update does not mention a settlement, leaving the status of any agreement and its possible impact on the increased claim amount unclear.
SEC Fines Genesis $21 Million
Meanwhile, the Securities and Exchange Commission has also taken action against Genesis, securing a conditional $21 million settlement. This fine will only be imposed if Genesis fails to compensate its customers through its ongoing bankruptcy proceedings fully.
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The escalating legal battles highlight the growing scrutiny faced by crypto firms and the increasing concern over investor protection in a largely unregulated market. This case will be closely watched as it unfolds, with potential implications for the companies involved and the wider crypto industry.
On the Flipside
- The current legal status is unclear. While a settlement with Genesis was reported earlier, the NYAG’s update makes no mention of it.
- The SEC’s fine only applies if Genesis doesn’t compensate customers through bankruptcy.
Why This Matters
New York’s tripling of alleged investor losses against DCG and Genesis, coupled with continued legal action, paints a stark picture of potential systemic risk in crypto lending and exposes broader regulatory questions for the entire industry. This case could set significant precedents for investor protection and shake confidence in the market.
If you’re interested in learning more about the recent crypto fraud case against Genesis and the New York Attorney General’s office, you can read this article:
Genesis Settles $1B Crypto Fraud Case with NY AG Office
Want to know more about the lawsuit against Gemini, Genesis, and DCG for allegedly defrauding investors? This article is for you:
New York AG Sues Gemini, Genesis, DCG for Defrauding Investors
