Gemini Trust Company, a cryptocurrency exchange co-founded by the well-known Cameron Winklevoss and Tyler Winklevoss, is currently embroiled in a legal battle. The lawsuit, brought by New York Attorney General Letitia James, who is also prosecuting former President Donald Trump on various charges of fraud, alleges that Gemini defrauded investors. Notably, this legal action doesn’t single out Gemini alone, as it also involves cryptocurrency firms Digital Currency Group (DCG) and Genesis Global Capital.
In this civil lawsuit, it is claimed that the three companies collectively defrauded more than 230,000 investors, resulting in losses exceeding $1 billion, as reported by Axios. Former Genesis CEO Soichiro “Michael” Moro and DCG founder and chief Barry Silbert are also charged in this case for their alleged attempts to hide the true financial condition of the lending unit.
The focus on Gemini and the Winklevoss twins centers on allegations that the digital asset platform failed to adequately disclose the financial status of Genesis before forming an investment platform called Gemini Earn in 2021. The lawsuit contends that Gemini endorsed Genesis as a “trusted company,” despite having internal risk assessments indicating otherwise.
Furthermore, it is alleged that in February 2022, Gemini revised its estimate of Genesis’ credit rating, downgrading it from the investment-grade BBB to the junk-grade CCC, all while failing to publicly inform investors of this change. The lawsuit also claims that Gemini continued to promote correlated investments as “low-risk” despite this credit rating downgrade. Additionally, there are allegations that many of the company’s risk assessors withdrew their own funds from Gemini Earn without disclosing this to investors.
Intriguingly, more than 60 percent of Genesis’ financials are said to have been linked to Sam Bankman-Fried’s embattled hedge fund, Alameda Research. This connection between Gemini and Genesis bears similarities to the ties between FTX and Alameda Research.
In response, Gemini took to Twitter to refute the allegations, asserting that it was a victim of fraud committed by Genesis and DCG. Notably, the firm did not comment on what it knew about Genesis’s financial condition and when it was aware of it, instead placing the blame on Genesis CEO Moro and DCG founder Silbert.
DCG founder Barry Silbert responded to the allegations with a statement that strongly refuted the claims, expressing his shock at the “baseless allegations” and his intent to fight the claims in court. Cameron Winklevoss has not issued his own statement but did retweet Gemini’s response to the matter.
Genesis halted all cryptocurrency trading last month and filed for bankruptcy protection in January. The lawsuit filed today aims to recover the $1 billion in losses and seeks to ban all three companies involved from the financial industry in New York.
