A New York judge has ruled that most of the civil fraud lawsuit filed by New York Attorney General Letitia James against Digital Currency Group (DCG) and two of its executives can move forward to trial.
This major legal decision comes after months of legal battles between state regulators and key players in the crypto industry, as authorities continue cracking down on alleged financial misconduct.
What Is the Case About?
The lawsuit, filed in 2023, claims that DCG, its CEO Barry Silbert, and Genesis Global Capital (a now-bankrupt lending arm), along with former Genesis CEO Michael Moro and crypto exchange Gemini, misled investors after a $1 billion hole appeared in Genesis’ finances.
The hole came from the collapse of Singapore-based hedge fund Three Arrows Capital (3AC) in 2022.
Instead of reporting the losses, Attorney General James claims that DCG and Genesis tried to hide the damage by using a promissory note — a promise to pay Genesis $1.1 billion over 10 years with only 1% interest — and falsely claimed on social media that DCG had covered the loss.
According to the lawsuit, DCG never made a single payment under that note.
Judge’s Ruling: What Moves Forward?
In her ruling, the judge allowed most of the case to proceed, saying that the Gemini Earn program, a lending product offered by the Gemini crypto exchange, can be considered a “security” under New York law — at least at this stage of the case.
This is important because if Gemini Earn is legally seen as a security, then the fraud case can fall under state securities law.
However, the judge did dismiss two of the charges:
- A claim under New York Executive Law (first-degree fraud)
- A claim for fifth-degree conspiracy
These two claims were thrown out because they were considered duplicates of other claims.
Background: What Is Gemini Earn?
Gemini Earn was a crypto lending program run by Gemini, where users could earn interest on digital assets they lent out. It shut down in November 2022 after the collapse of Genesis Global Capital.
The program is now at the center of the fraud case, as it allegedly involved misleading promises to investors.
What Are DCG and Barry Silbert Saying?
DCG continues to deny the claims, calling them “a thin web of innuendo and mischaracterizations.”
In a statement, a DCG spokesperson said:
“We’re encouraged by the judge’s dismissal of the most outrageous claims. We will continue to fight this baseless lawsuit as we remain focused on our mission in support of the digital assets industry.”
Settlements So Far
While DCG, Silbert, and Moro are still fighting in court, Gemini and Genesis have already settled with the New York Attorney General’s Office (OAG). The details of those settlements were not fully made public.