(Bloomberg) — Crypto exchange Gemini Trust Co. agreed to pay $50 million to resolve claims brought by New York’s Attorney General accusing the company of defrauding investors.
Attorney General Letitia James sued Gemini in October, accusing the platform of lying to more than 230,000 investors about the risks associated with its investment program, Gemini Earn.
The settlement announced Friday will see Gemini return about $50 million of digital assets to investors who were locked out of their accounts when the program collapsed. Gemini will also be banned from operating a crypto lending program in New York, James said.
“Hundred of thousands of people, including at least 29,000 New Yorkers, had their trust broken and their money swindled by Gemini through its bogus Earn program,” James said in a statement. “Today’s settlement will make defrauded investors whole and should remind cryptocurrency companies that deceiving investors is illegal and will not be tolerated.”
Friday’s settlement comes after James launched a handful of investigations targeting the crypto industry, including Barry Silbert’s Digital Currency Group. DCG is the parent company of Genesis Global Holdco LLC, a crypto lender that operated the Earn program with Gemini. Genesis reached a $2 billion settlement with the Attorney General earlier this year.
James had accused Genesis and DCG of attempting to hide more than $1 billion in losses following the collapse of crypto hedge fund Three Arrows Capital, allegations the companies have denied.
Genesis suffered heavy losses during the crypto market downturn, primarily after the collapse of Three Arrows and the crypto exchange FTX in 2022.
DCG, which was once valued at $10 billion, previously disclosed that the company received about $575 million in loans from Genesis Global Capital. In a letter to shareholders in November 2022, Silbert, DCG’s founder and chief executive officer, referred to a $1.1 billion promissory note, which he said came about as the parent company stepped in to assume liabilities from Genesis related to the implosion of Three Arrows.
(Updates with background on case.)
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