Friday, July 19, 2024

Crypto trust firm Gemini sued Digital Currency Group on Friday, alleging the industry conglomerate and its founder Barry Silbert committed “fraud” through DCG subsidiary Genesis, which held funds for Gemini tied to the latter company’s Earn program.

The lawsuit is intended to recover Gemini’s funds from DCG, a filing made to the New York County Supreme Court said. Gemini entered into a partnership with Genesis which allowed its customers to earn up to 7.4% in annual percentage yield. Gemini sent its customers’ funds to Genesis, which in turn loaned them out to companies like the now-defunct Three Arrows Capital. Like Genesis, CoinDesk is a subsidiary of DCG.

“From the beginning, Genesis – acting in concert with Defendants and with Defendants’ active support and encouragement – induced the Gemini Earn Lenders to lend by touting Genesis’s purportedly robust risk-management practices and a supposedly thorough vetting process of the counterparties to which it re-lent the assets,” the filing said. “Those were lies.”

The lawsuit alleges that Silbert asked Gemini to continue its Earn program even though he “was aware at the time that Genesis was massively insolvent,” and took other steps to hide that Genesis had a billion-dollar hole on its balance sheet. Genesis filed for bankruptcy in January 2023.

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