Digital Currency Group Wants NY Fraud Lawsuit Tossed

Digital Currency Group (DCG) wants a lawsuit accusing it of defrauding cryptocurrency investors dismissed.

The company is urging a New York court to throw out the lawsuit, which alleges DCG defrauded investors via its Genesis Global Capital business, Reuters reported Wednesday (March 6).

New York Attorney General Letitia James last year sued DCG, crypto lender Genesis, and Gemini Trust, the exchange run by brothers Cameron and Tyler Winklevoss, alleging the companies engaged in what was described at the time as a $1 billion fraud scheme.

In February, James later amended her complaint, saying more investors have come forward and claimed they were misled about an investment program known as Gemini Earn.

Further “investigation revealed that these additional investors were similarly defrauded and provided with false assurances that their funds were safe when in fact they were not, leading to an additional $2 billion in assets that were lost.”

In all, the attorney general’s office accuses the companies of defrauding more than 230,000 investors out of more than $3 billion.

According to the Reuters report, DCG argued in its motion to dismiss the case that it can’t be held accountable for re-sharing social media posts by Genesis, such as a tweet from June 2022 that said the company’s balance sheet was “strong” and its “lending business continues to meet client demand.”

DCG said there is no claim that it wrote those statements, which it described as a type of “corporate optimism” that other courts have ruled do not amount to fraud, the report added.

The news comes one week after the New York State Department of Financial Services (DFS) said Gemini Trust agreed to return at least $1.1 billion to customers of Gemini Earn after the state found that Gemini had failed to conduct due diligence.

“Gemini failed to conduct due diligence on an unregulated third party, later accused of massive fraud, harming Earn customers who were suddenly unable to access their assets after Genesis Global Capital experienced a financial meltdown,” DFS Superintendent Adrienne A. Harris said in a news release.

Gemini Trust said on X, formerly known as Twitter, that it thanked DFS for its part in a settlement in principle that it reached with Genesis and other creditors in Genesis’ bankruptcy.

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