Summary

• New York Attorney General Letitia James is suing Gemini Trust, Genesis Global Capital, and Digital Currency Group (DCG) for allegedly defrauding over 230,000 investors, including at least 29,000 New Yorkers, out of more than $1 billion.
• The lawsuit centers around the lending relationship between Gemini and Genesis, where funds extended by Gemini were not disclosed to investors, leading to substantial losses and potential implications for cryptocurrency market regulation and investor protection.

New York Attorney General Letitia James is suing major crypto industry players Gemini Trust, Genesis Global Capital, and Digital Currency Group (DCG). The lawsuit alleges that they defrauded over 230,000 investors, with at least 29,000 of them being New Yorkers, resulting in losses exceeding $1 billion.

"Today's lawsuit is the latest action taken by Attorney General James to rein in the cryptocurrency industry and protect investors," said the statement. 

James is now pursuing a ban on these entities from operating in New York's financial investment sector. The lawsuit centers around the lending relationship between Gemini and Genesis, which is owned by DCG. Funds extended by Gemini, as part of its Earn program, eventually found their way to trading firms Three Arrows Capital and Alameda Research, both of which went bankrupt. Genesis was left with a substantial $1.1 billion deficit, a fact that was not disclosed to investors.

The lawsuit asserts that Gemini was aware of the undersecured nature of Genesis' loans and that they were significantly concentrated with Alameda Research, but this information was not communicated to investors. Additionally, Genesis' former CEO Soichiro Moro and DCG CEO Barry Silbert are accused of trying to conceal heavy investor losses.

Attorney General James emphasized the need to protect cryptocurrency investors and enforce stronger industry regulations. This legal action follows earlier cases by federal authorities and regulatory bodies against various major crypto players, including Mashinsky, FTX founder Sam Bankman-Fried, Binance, and Coinbase, reflecting the increasing scrutiny on the industry.

The outcome of this lawsuit may have a lasting impact on the cryptocurrency market, with potential implications for investor protection and industry oversight.