New York Attorney General Letitia James on Friday expanded her lawsuit against Digital Currency Group and other cryptocurrency defendants, tripling the value of their alleged fraudulent activities to more than $3 billion.
James filed the lawsuit in October against Digital Currency, its subsidiary Genesis Global Capital, and Gemini Capital, the exchange run by twin brothers Cameron and Tyler Winklevoss.
She claimed the company misled investors about its “Gemini Earn” program, which allowed customers to lend their crypto assets to Genesis in exchange for high interest rates, causing losses of more than $1 billion.
The attorney general said that as more investors came forward, it became clear that “a fraud perpetrated by DCG through Genesis” also entrapped investors who sent money directly to Genesis and were falsely assured their funds were safe.
James is seeking more than $3 billion in damages from more than 230,000 investors who he believes were victimized by fraud.
“This illegal crypto scheme and the horrific financial losses suffered by real people are yet another reminder that stronger crypto regulation is needed to protect all investors,” James said in a statement.
DCG said on Friday that Mr James' lawsuit was “without merit” and that it expected to succeed in court.
“DCG has always conducted its business lawfully and with integrity and DCG and Barry Silbert will be completely exonerated,” it said in a statement.
Genesis is expected to file for bankruptcy and close in January 2023.
The company reached a settlement with James' firm late Thursday, agreeing to pay for fraud allegations as long as it reimburses clients in full through the Chapter 11 bankruptcy proceeding. The settlement must be approved by a bankruptcy judge.
Representatives for DCG and Gemini did not immediately respond to requests for comment.
Also named as defendants are DCG's chief executive officer, Silbert, and Genesis' former chief executive officer, Soichiro Moro.
Genesis filed for bankruptcy two months after halting withdrawals by Gemini Earn clients following the collapse of Sam Bankman Freed's FTX cryptocurrency exchange.
Genesis and Gemini were also sued by the Securities and Exchange Commission for circumventing disclosure requirements meant to protect Gemini Earn customers.
Last week, Genesis agreed to pay a $21 million fine to the SEC, but was also contingent on first paying back its customers, while Gemini is suing DCG over a failed crypto-lending partnership.
