According to a Fortune Magazine report, Digital Currency Group (DCG) has submitted a motion to the New York Supreme Court to dismiss a lawsuit filed against the company by New York Attorney General Letitia James.
The lawsuit, filed in 2023, alleges that DCG and its lending subsidiary Genesis and crypto firm Gemini defrauded over 230,000 investors of more than $1 billion. DCG’s CEO, Barry Silbert, is also named a defendant in the lawsuit.
‘Thin Web Of Innuendo’
The lawsuit accuses DCG of attempting to conceal losses exceeding $1.1 billion from investors and Gemini during the crypto market collapse in 2022. However, DCG’s attorneys argue that the claims made by the attorney general’s office are “baseless” and lack substance.
Notably, Digital Currency Group’s attorneys further describe the allegations as a “thin web of baseless innuendo” and accuse the office of searching for a “headline-worthy scapegoat.”
DCG’s legal team asserts that the company acted in good faith and under the guidance of top accountants and investment bankers, including issuing a controversial $1.1 billion promissory note to Genesis. They argue that DCG’s support of its subsidiary should not be portrayed as participation in fraud.
Digital Currency Group, established in 2015, has gained influence within the crypto industry through its venture portfolio and subsidiaries, including Genesis, Foundry (a mining firm), and CoinDesk (a crypto publication). In conjunction with Gemini, Genesis lent assets to trading firms such as Three Arrows Capital and Alameda Research.
Gemini’s Earn program, initiated during the crypto bull market in 2021, enabled customers to earn high yields on their crypto assets. Genesis partnered with Gemini to lend out customer assets and further lent to firms like Three Arrows Capital and Alameda Research.
However, the program collapsed in 2022 following the failure of Genesis’s counterparties. As Bitcoinist reported, Genesis subsequently halted withdrawals, filed for bankruptcy, and faced legal action from the Securities and Exchange Commission and the New York Office of the Attorney General.
Digital Currency Group Denies Involvement In Lawsuit Charges
Per the report, Digital Currency Group maintains that it was not involved in many of the charges outlined in the lawsuit, including allegations of misrepresentation by Gemini regarding the risks of the Earn program. The attorneys argue that accusations of fraud against DCG rely on retweets of content by others, citing a federal statute that prohibits liability for retweeting.
Furthermore, DCG’s attorneys claim that the promissory note was valid and properly endorsed by the company’s board of directors and advisors. They argue that statements made by DCG about its business operating “normally” were too vague to serve as the basis for a fraud claim.
While the lawsuit between Digital Currency Group and Attorney General Letitia James is ongoing, Genesis settled with the office in February as part of its bankruptcy proceedings. Currently, DCG and Genesis are involved in a dispute concerning the subsidiary’s bankruptcy plans.
Featured image from Shutterstock, chart from TradingView.com