Filings shake up NY Attorney General case against Genesis, Gemini - DeviceFile

Filings shake up NY Attorney General case against Genesis, Gemini

The NYAG reached a settlement with Genesis Holdco in a Feb. 8 filing and named it in an amended complaint on Feb. 9.

The New York State Office of the Attorney General (NYAG) settled with Genesis Global Holdco in a proposed motion in its case surrounding the Gemini Earn program on Feb.

8. The following day, the NYAG filed a new, expanded complaint in the case, naming Genesis Global Holdco and all its codefendants, however.

The Genesis holding company filed a motion for the New York Southern District Bankruptcy Court to

approve a settlement agreement between it and the NYAG on Feb. 8. The settlement is the “product of extensive negotiation,” the filing said.

The Genesis settlement stipulated that the NYAG would receive payment on its claims on equal footing

with the United States Securities and Exchange Commission (SEC) and only after payments to creditors.

Genesis settled with the SEC for $21 million on Jan. 31. The court will consider both settlements on Feb. 14.

In October, NY Attorney General Letitia James filed suit against Genesis Holdco, Genesis Global Capital,

Genesis Asia Pacific, their parent company Digital Currency Group (DCG), cryptocurrency exchange

Gemini, former Genesis CEO Michael (Soichiro) Moro and DCG CEO Barry Silbert for fraud in

connection with the Gemini Earn program. The NYAG accused the parties of defrauding more than

230,000 investors, including 29,000 New Yorkers, of more than $1 billion, among other charges.

On Feb. 9, James announced that the NYAG was expanding its claims against DCG, Silbert and Moro. The NYAG had found additional investors who had lost funds:

“In total, OAG [Office of the Attorney General] found that these companies defrauded more than 230,000 investors out of more than $3 billion.”
In spite of the settlement reached a day earlier, Genesis Holdco (as one of the “Genesis/DCG

Defendants”) is mentioned in five of the ten cause of action in the new complaint. According to the amended complaint:

“Gemini solicited money from the public with false assurances that Earn was a highly

liquid investment and that Genesis Capital was creditworthy based on Gemini’s ongoing risk monitoring.

In reality, however, Gemini’s confidential risk reports found that Genesis Capital posed a high risk of default.”
Claims that the Genesis loan book was overcollateralized were false, and much of Gemini customers’

funds were invested in FTX-affiliated Alameda Research. Genesis also suffered losses

from the collapse of Three Arrows Capital, the complaint continued. It is seeking a

permanent enjoinder against the defendants from operating related businesses in New York state and disgorgement of illegally obtained funds and repayment of investors.

Gemini and Genesis partnered on the Gemini Earn program, which was launched in 2021.

Genesis suspended withdrawals in November 2022 and filed for bankruptcy in January 2023.

A flurry of court action resulted. The SEC filed a complaint against Gemini and Genesis in January 2023.

Gemini sued Genesis in July and again in October. Genesis reached an agreement with the New York

Department of Financial Services for Anti-Money Laundering failings and weak cybersecurity in

January. It also lost its New York BitLicense under the agreement.