IDA-backed cryptocurrency firm Gemini faces US fraud lawsuit

Alleged fraud 'yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry'

Thu, 19 Oct, 2023 - 18:30

Erik Larson

Cryptocurrency firm Gemini is being sued by New York’s top law enforcement officer, along with another firm called Genesis Global, for allegedly defrauding customers of $1.1bn (€1bn).

The lawsuit was filed New York attorney general Letitia James. She is accusing the two companies of failing to disclose to investors the risks of a crypto-lending programme they started in 2021.

The venture’s assets collapsed last year amid several bankruptcies in the sector, including the collapse of Sam Bankman-Fried’s FTX.

In May this year, Gemini, in a move supported by IDA Ireland, announced that it would be making Dublin the centre for its European operations, where it planned to launch its crypto platform across 12 markets including Ireland.

Gemini was founded by twins Tyler Winklevoss and Cameron Winklevoss who famously sued Mark Zuckerberg, claiming he stole the idea for Facebook from them. The parties eventually settled.

In the announcement, the Winklevoss twins thanked IDA Ireland and the Irish Government for their support.

Risky loans

The New York lawsuit accuses Gemini of lying to customers about how risky loans were in its venture with Genesis and failing to disclose that at one point, almost 60% of its third-party loans were to Mr Bankman-Fried’s crypto trading firm Alameda Research.

Mr Bankman-Fried is currently on trial accused of moving billions of dollars in customer funds from FTX to Alameda Research.

Genesis, and its parent company Digital Currency Group (DCG), were accused in the suit of trying to conceal spiralling losses.

The alleged fraud by the companies is “yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry,” Ms James said in a statement.

“My office will continue our efforts to stop deceptive cryptocurrency companies, and to push for stronger regulations to protect all investors,” said the attorney general.

The state said it wants to ban Gemini, Genesis, and DCG from the financial investment industry in New York. James is also seeking restitution for investors and disgorgement of the companies’ allegedly ill-gotten gains.

Representatives for Gemini, Genesis, and DCG did not immediately respond to requests for comment.

In a statement, IDA Ireland said it is a legal matter for Gemini and as such it would not be appropriate to comment.