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The New York Attorney General (NYAG) has filed a lawsuit against Digital Currency Group (DCG) and its CEO Barry Silbert, Genesis and its ex-CEO Michael Moro, and Gemini. The lawsuit alleges that these three companies defrauded 230,000 investors, including about 29,000 New York residents, out of more than $1 billion.
According to the complaint, Silbert and the other defendants lied and schemed to defraud Gemini Earn stakeholders, especially regarding the financial condition of its primary partner, Genesis.
The NYAG alleges that Gemini misled investors about Gemini Earn, an investment program operated in collaboration with DCG subsidiary Genesis Global Capital. Gemini promoted Gemini Earn as a low-risk investment yielding ultra-high interest rates.
Unfortunately, despite these claims, Gemini Earn failed, losing over $1 billion of its customers’ money. Genesis is also bankrupt.
At one point, Sam Bankman-Fried’s Alameda was the borrower for nearly 60% of all outstanding loans from Genesis. Even more breathtaking, Alameda collateralized most of those loans with FTT tokens.
The NYAG alleges that DCG, Silbert, Genesis, Moro, and Gemini all lied about the risks of this failed program. They also withheld material information about Gemini Earn’s massive risks. According to the suit, all of the defendants illegally concealed massive losses from investors and Gemini Earn customers.
A rough timeline of lies and illegal activities
February 2, 2021: Gemini announces the launch of Gemini Earn.
June 17, 2022: Then-CEO of Genesis Trading Michael Moro says Genesis Global Capital is working on mitigating losses due to a “large counterparty” that failed to meet a margin call. He falsely claims that no client funds are impacted.
June 29, 2022: Genesis Global Capital confirms “hundreds of millions” in exposure to the now-bankrupt Three Arrows Capital. The co-founder of Three Arrows Capital is currently in jail.
July 6, 2022: Michael Moro confirms a significant loan to “a large counterparty who failed to meet a margin call.” He said Genesis liquidated the posted collateral to hedge its downside. He also confirmed that Genesis’ parent company, DCG, would assume most of the liability to protect Genesis’ finances. That counterparty, Three Arrows Capital, subsequently filed for bankruptcy protection during the fallout from Do Kwon’s Terra/LUNA meltdown.
November 10, 2022: Genesis Global Capital reveals that its derivatives wing has $175 million of funds locked within FTX.
November 11, 2022: DCG sends a $140 million equity infusion to Genesis.
November 16, 2022: Genesis Global Capital freezes redemptions, impacting Gemini Earn customers’ ability to withdraw their funds.
November 16, 2022: Genesis Global Capital reveals to Gemini that it sold 30.9 million GBTC shares at $9.20 per share. The net proceeds were applied to the amount it owed to Gemini Earn.
November 17, 2022: Circle confirms “minimal” exposure to Genesis through its Circle Yield product — $2.6 million in outstanding loans that Circle says are well-collateralized.
November 22, 2022: Barry Silbert sends a letter to DCG shareholders sharing the details of a $1.1 billion promissory note issued to Genesis after the Three Arrows Capital meltdown.
Barry's message to shareholders via @fintechfrank pic.twitter.com/lz8ZZ8ClQK
— db (@tier10k) November 22, 2022
Read more: Genesis pressure mounts as Cameron Winklevoss threatens Barry Silbert
January 8, 2023: Gemini formally ends its Gemini Earn program.
January 10, 2023: Gemini co-founder Cameron Winklevoss tweets an open letter accusing DCG and Genesis Global Capital of making misleading statements to Gemini and Gemini Earn investors. He calls for the ousting of CEO Barry Silbert.
January 10, 2023: Gemini and its co-founders file a response to a lawsuit filed by Brenda Picha and Max Hastings, two Gemini Earn users who lost funds due to the meltdown in the relationship between Gemini Earn and Genesis Global Capital. In the response, Gemini alleges, “Due to events beyond defendants’ control, Genesis has wrongfully refused to return Plaintiffs’ assets.”
January 12, 2023: The SEC announces charges against Genesis Global Capital and Gemini Trust Company for “the unregistered offer and sale of securities to retail investors” through Gemini Earn.
January 19, 2023: Genesis’ lending arm files for Chapter 11 bankruptcy in the Southern District of New York.
February 6, 2023: DCG announces a tentative settlement between Genesis and its creditors.
April 25, 2023: DCG publishes a statement on Gemini’s motion for mediation, claiming that “a group of Genesis Capital’s creditors have reneged” on an earlier settlement. Genesis creditors reject a proposed bankruptcy settlement.
May 9, 2023: DCG publishes a statement on ongoing mediation in which it says it is committed to pursuing a “fair” outcome for all parties involved.
July 7, 2023: Gemini sues DCG for fraudulently covering up its Three Arrows Capital-induced insolvency
August 10, 2023: DCG files to dismiss Gemini’s lawsuit.
August 29, 2023: DCG publishes a statement on a tentative deal between Genesis and the Unsecured Creditors Committee.
September 13, 2023: DCG publishes an open letter that estimates a 70-90% return for all unsecured creditors and a 95-110% return for Gemini Earn users.
September 28, 2023: Sources say the Winklevoss twins withdrew $280 million from Genesis before it collapsed.
October 19, 2023: The NYAG sues DCG, Barry Silbert, Genesis, Michael Moro, and Gemini, alleging various frauds that cost investors over $1 billion.