In October 2023, the agency filed a lawsuit against the companies and their management with accusations of defrauding 230,000 investors in excess of $1 billion.
According to the investigation, Gemini lied to users about the Earn staking program, which it implemented jointly with Genesis. The Winklevoss brothers company has repeatedly assured investors that the product is low-risk.
Gemini transferred the funds raised under Earn to Genesis, which used them to issue loans to the bankrupt Three Arrows Capital and Alameda Research.
Gemini knew that Genesis loans were insufficiently secured, and the lender's financial performance was unsatisfactory, but hid this from investors, law enforcement officials say.
"The fraud turned out to be so extensive that many other victims reported damage. This illegal cryptocurrency scheme and the terrible financial losses suffered by real people are yet another reminder of the need for stricter rules on digital assets to protect all investors," New York Attorney General Letitia James said in February.
She urged residents of the state affected by fraud in the cryptocurrency market to report this to the OAG. James also asked employees of companies in the crypto industry who witnessed fraud or other misconduct to file anonymous online complaints with the department.