US Prosecutors Accuse Major Cryptocurrency Firms of a $1 Billion Fraud
New York’s Attorney General, Letitia James, has levied allegations against three prominent cryptocurrency companies, contending that they orchestrated a fraudulent scheme resulting in the defrauding of investors to the tune of over $1 billion.
The accused companies include Gemini, a cryptocurrency exchange; Genesis, a cryptocurrency lending platform; and Digital Currency Group (DCG), the parent company of Genesis.
The central focus of the case revolves around an initiative referred to as Gemini Earn, which was launched in 2021. This programme enabled users to lend cryptocurrencies to Genesis with the promise of receiving interest rates exceeding 7% in return.
However, prosecutors argue that Gemini was aware of Genesis’s precarious financial situation from the inception of this program. Despite this knowledge, the lawsuit asserts that Gemini failed to warn customers about the inherent risks of lending to Genesis, instead falsely claiming that the company had undergone rigorous vetting.
The situation took a more perilous turn in June 2022 when Genesis experienced losses exceeding $1 billion due to the collapse of another cryptocurrency firm. To conceal this dire situation, prosecutors allege that Genesis and DCG resorted to financial manoeuvres and provided false reports, including misleading information, to Gemini. Astonishingly, they continued to publicly assert the strength of their balance sheet despite the mounting losses.
Gemini, founded by the Winklevoss twins, publicly disavows any wrongdoing in this case. The exchange claimed that the lawsuit corroborated its allegations against Genesis and expressed disagreement with being named as a defendant. In a statement released on social media, Gemini contended that holding a victim responsible for being deceived and misled is senseless and expressed its intent to vigorously defend itself against these accusations.
Attorney General James highlighted the impact of the alleged fraud on unsuspecting investors, citing the example of a 73-year-old retired grandmother among the 232,000 affected individuals who endured losses.
This legal action contributes to the growing number of legal challenges faced by the cryptocurrency sector and underscores the imperative need for regulation in an industry known for its volatility and susceptibility to fraudulent activities.
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