The New York Attorney General’s Office (NYAG) filed its fraud claims against Digital Currency Group (DCG) and related parties on February 9.
The NYAG lawsuit originally claimed more than $1 billion in losses; however, it has been amended to include an additional $2 billion in losses, bringing the total to $3 billion, which would reportedly affect more than 230,000 investors in total.
New York Attorney General Letitia James said:
“After months of false promises, we pulled back the curtain and revealed that DCG lied to investors and defrauded them of billions… The fraud and deceit was so widespread that many more people have come forward to report similar damages.”
The NYAG said the amended complaint was filed against Digital Valuta Group, DCG CEO Barry Silbert, DCG subsidiary Genesis Global Capital and former Genesis CEO Soichiro Moro. The office explicitly stated that the amended complaint is a result of those investors coming forward.
Bloomberg previously reported that Genesis had settled the NYAG lawsuit, apparently based on bankruptcy filings. A Feb. 8 bankruptcy filing noted that “debtors and NYAG have reached a resolution of the NY Action.”
However, the NYAG’s more recent update makes no mention of a settlement, and it is unclear whether a deemed agreement would apply to the increased amount.
The NYAG lawsuit began in October 2023
The New York Attorney General’s office initially began its lawsuit in October 2023.
The case was against DCG, Genesis and its independent partner Gemini for offering an interest-bearing crypto lending service called Gemini Earn. Although Gemini Earn advertised as a low-risk product, the NYAG found that the company’s finances posed significant risks.
The NYAG alleged that Genesis and DCG executives tried to hide losses by entering a $1.1 billion promissory note, promising repayment between the two companies over a ten-year period.
According to the NYAG, the promissory note and the attempt to conceal losses were “part of a scheme to defraud investors and the public.”
The SEC has also taken action against Genesis. This resulted in a $21 million conditional settlement, which Genesis will only pay if it cannot fully compensate customers as part of the bankruptcy proceedings.