Gemini Trust Company, the cryptocurrency exchange led by the infamous Winklevoss twins, Cameron and Tyler, finds itself embroiled in a lawsuit alleging fraudulent activities that cost investors over $1 billion. New York Attorney General Letitia James filed this lawsuit, the same AG currently prosecuting former President Donald Trump on a wide array of fraud charges.
This lawsuit isn’t exclusive to Gemini, as it also implicates two other prominent cryptocurrency firms, Digital Currency Group (DGC) and Genesis Global Capital. Collectively, the civil lawsuit claims that these three entities collectively defrauded more than 230,000 investors out of substantial sums, according to reports from Axios. Additionally, the AG has brought charges against former Genesis CEO Soichiro “Michael” Moro and DCG founder and chief, Barry Silbert, for their alleged efforts to conceal the true financial status of their lending unit.
Concerning the Winklevoss twins and their company, Gemini, the lawsuit alleges that they failed to adequately disclose Genesis’s financial condition before partnering with them to establish an investment platform named Gemini Earn in 2021. The suit argues that Gemini presented Genesis as a “trusted company” despite internal risk assessments suggesting otherwise.
Furthermore, it claims that in February 2022, Gemini revised its assessment of Genesis’s credit rating from investment-grade BBB to junk-grade CCC, all without publicly disclosing this change to investors. Gemini allegedly continued to market correlated investments as “low-risk” despite this adjustment. The lawsuit also contends that many of the company’s risk assessors withdrew their own funds from Gemini Earn without informing investors.
There are additional allegations that more than 60% of Genesis’s financial assets were tied to Sam Bankman-Fried’s controversial hedge fund, Alameda Research. This connection between Gemini and Genesis mirrors the relationships between FTX and Alameda Research, which had previously faced scrutiny.
Gemini took to X/Twitter, a preferred social media platform for crypto enthusiasts, to deny the allegations. They claimed to be the victims of fraud orchestrated by Genesis and DCG, notably avoiding any comments about their knowledge of Genesis’s poor financial condition and when they became aware of it. Gemini squarely placed the blame on Genesis CEO Moro and DCG founder Silbert, saying, “Blaming a victim for being defrauded and lied to makes no sense, and we look forward to defending ourselves against this inconsistent position.”
DCG founder Barry Silbert issued his statement strongly refuting the allegations and expressing his shock at the baseless nature of the Attorney General’s complaint. He declared his intention to fight these claims in court, while Cameron Winklevoss has not released a statement but did retweet Gemini’s response.
Genesis, after filing for bankruptcy protection in January, ceased all cryptocurrency trading last month, as reported by CoinDesk. The current lawsuit aims to recover the $1 billion in losses and seeks to bar all three companies from the financial industry in New York.
