Crypto Firms Face Legal Action in New York Over Alleged Investment Misrepresentations
New York's legal action targets crypto firms for misleading investors, seeking bans and compensation.
Thu, 19 Oct 2023, 23:28 pm UTC
The New York attorney general's office has launched a legal challenge against cryptocurrency businesses Gemini, Genesis, and Digital Currency Group, accusing them of misleading investors via the Gemini Earn investment initiative.
According to details provided by Attorney General Letitia James, the lawsuit alleges that these entities duped over 23,000 investors, including a sizable portion of 29,000 New York residents, leading to financial losses exceeding $1 billion.
The probe spearheaded by James’ team contends that Gemini misrepresented facts about its Gemini Earn initiative, which it coordinated with Genesis. Despite assurances that the investment was low in risk, evidence suggests that Genesis' financial activities carried significant risks. The lawsuit indicates that Gemini was aware of the precariousness of Genesis’ loans, particularly noting that a substantial portion was linked to one organization, Alameda, led by Sam Bankman-Fried. However, this critical information was withheld from potential investors.
Furthermore, the legal action points fingers at Genesis and its past CEO, Soichiro Moro, along with the parent establishment, DCG, and its top executive Barry Silbert. The allegations claim that they undertook deceptive measures to hide financial setbacks amounting to $1.1 billion.
The goal of the lawsuit is twofold. Firstly, it seeks to prohibit Gemini, Genesis, and DCG from any future financial ventures within New York. Secondly, it demands compensation for the affected investors and the recovery of dishonestly acquired funds.
Reflecting on the matter, a communique from the attorney general's office emphasized the adverse impact on "middle-class investors." The narrative conveyed that countless individuals incurred significant losses based on false assurances that their contributions to Gemini Earn would be secure and profitable.
Furthermore, James stated that while Gemini obscured the inherent investment risks linked with Genesis, the latter deliberately provided false financial disclosures. Highlighting broader concerns, James cited this situation as symptomatic of the challenges arising from the insufficiently supervised crypto sector.
It's worth noting that in January 2023, both Genesis and Gemini faced legal complications with the United States Securities and Exchange Commission. The central issue then was the alleged distribution of unregistered securities via their Earn program.
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