Crypto is back in court. Early on Thursday, New York Attorney General Letitia James announced that her office filed suit against crypto companies, Gemini (the crypto trading platform), Genesis Global, and Digital Currency Group. Here is what happened:
According to the complaint, Genesis launched an investment program called Gemini Earn (which was heavily promoted by both Genesis and Gemini). Earn was marketed as being a high-yield investment program where Gemini customers could profit by passively investing their cryptocurrencies with Genesis. Clearly the marketing paid off because Genesis held several billion dollars in Earn investor assets.
Things start to turn in November of 2022. At that time, Genesis announced it was suspending all withdrawals of Earn, leaving those investors with more than $1 billion in losses. Turns out, as alleged in the complaint, two fraudulent schemes led to these loses.
In short, Gemini solicited money from the public with false assurances that Earn was a highly liquid investment and that Genesis was creditworthy based on Gemini’s ongoing risk monitoring. Apparently the reality of the situation was that Genesis posed a high risk of default an Gemini knew it. Genesis’ CEO and Digital Currency Group’s founder also both concealed the true financial condition of Genesis.
Wasn’t FTX involved?
Kinda. FTX’s sister company, Alameda apparently accounted for nearly 60% of Genesis’ outstanding loans to third parties at one point in time. However, in 2022, Genesis did recall nearly $2 billion in loans.
That wasn’t the only name that sounds familiar. Both Cameron and Tyler Winklevoss were referenced in the complaint, as they created Gemini and were acting president and CEO at the time.
Needless to say this case is high profile and raises more questions about the future of crypto and crypto regulations. Something to key an eye on for sure.