New York has expanded what had been a $1 billion lawsuit against three cryptocurrency companies.
Now, Attorney General Letitia James is alleging that the fraud scheme carried out by Digital Currency Group (DCG), its Genesis Global Capital offshoot, and Gemini Trust was three times the size once thought, at $3 billion.
In an amended complaint filed Friday (Feb. 9), James says that more investors have come forward since her office sued the three companies last year, alleging that they misled investors about an investment program known as Gemini Earn.
According to a news release, further “investigation revealed that these additional investors were similarly defrauded and provided with false assurances that their funds were safe when in fact they were not, leading to an additional $2 billion in assets that were lost.”
In all, the attorney general’s office found that the companies defrauded more than 230,000 investors out of upwards of $3 billion, the release said.
“After months of false promises, we pulled the curtain back and revealed that DCG was lying to investors and defrauding them out of billions,” James said. “The fraud and deceit were so expansive that many additional people have come forward to report similar harm.”
PYMNTS has contacted DCG and Gemini for comment but has not yet gotten a reply. Both companies have said in the past that they intend to fight the suit’s allegations.
James sued the companies last year, accusing them of not disclosing the risks associated with their crypto lending program.
According to the suit, Gemini misled customers by failing to disclose that its third-party loans were given to convicted crypto fraudster Sam Bankman-Fried’s now-collapsed crypto trading firm, Alameda Research.
The crypto sector — while not as enmeshed in scandal as it was last year — is still “far from being integrated into the broader financial system, and being boring doesn’t translate into being reliable,” as PYMNTS wrote last year.
As if to underline this fact, the Solana blockchain — a Web3 network that crypto evangelists see as a rising star in the sector — suffered a five-hour outage last week.
“Yesterday’s outage on the Solana network marks the 11th time the blockchain has gone down in the last two years,” Akash Mahendra, head of developer relations at Layer1 blockchain Haven1, said in a statement provided to PYMNTS. “… No other major blockchain network could go down for five hours and brush this off as a non-event.
“If Solana truly wants to become a blockchain for the masses, it cannot afford to keep experiencing outages, not once a year, not ever,” he added.