Maybe New York will claw back the $282 Million in Crypto they withdrew. New York sues crypto firms for alleged $1 billion fraud, cites SBF hedge fund bet https://www.msn.com/en-us/money/mar...on-fraud-cites-sbf-hedge-fund-bet/ar-AA1ivMTv Crypto firms DCG and Gemini allegedly defrauded investors out of a collective $1.1 billion, New York prosecutors alleged. The firms had significant exposure to defunct crypto trading desks Three Arrows Capital and Sam Bankman-Fried's Alameda Research, per the filing. DCG is run by Barry Silbert, and Gemini was founded by Cameron and Tyler Winklevoss. Crypto firms Digital Currency Group and Gemini defrauded more than 230,000 investors out of a collective $1.1 billion, New York state prosecutors said in a lawsuit filed in Manhattan Thursday. They cited a series of missteps, including failure to adequately manage the risk associated with exposure to Sam Bankman-Fried's bankrupt and allegedly fraudulent crypto trading firm. To perpetrate the alleged fraud, Digital Currency Group and its subsidiaries and affiliates, including Genesis Global Capital and Genesis, lied to investors, created false financial documents and withheld information from creditors, prosecutors alleged. Genesis was once the flagship of crypto mogul Barry Silbert's empire. An over-the-counter trading desk, prime brokerage and lender, it collected crypto from its customers and lent it out to other parties, reaping profits from the interest it charged its clients. For a time, it was very lucrative, until crypto hedge fund Three Arrows Capital defaulted on its loans and sent much of the crypto world into tumult. In a statement, DCG said it had been cooperating with the New York state probe for months "in an open and transparent manner." Genesis and DCG have since acknowledged their significant exposure to Three Arrows, or 3AC. But New York prosecutors alleged that Genesis both failed to audit 3AC properly for more than two years, and that when 3AC collapsed, Genesis and its parent company DCG conspired to conceal details of the crisis from investors and the public. Those investors included Gemini, which was founded by Cameron and Tyler Winklevoss, and its customers. Gemini operated a high-yield program called Gemini Earn, which allowed retail customers to hand over their crypto to Gemini in what was described as a "low-risk" model, prosecutors said. Gemini would then give Genesis that customer crypto for further lending, collecting a slice of Genesis' interest. The program launched in February 2021, while interest rates were still depressed and many investors were hunting for yield. One of Genesis's biggest counterparties was Sam Bankman-Fried's trading firm Alameda Research. By extension, prosecutors say, that meant that Gemini also had exposure to Alameda — and allegedly knew they did. New York prosecutors in the same suit accused Gemini of failing to address the "risky" exposure it had to Bankman-Fried's Alameda Research, through its relationship with Genesis. Gemini conducted risk analyses on Genesis' loan book that allegedly showed a major exposure to Alameda, as high as 60% at one unspecified point, and revised Genesis' internal creditworthiness to junk status, according to prosecutors. But in spite of those internal analyses, prosecutors say that Gemini didn't end its significant exposure to Genesis and Bankman-Fried, despite one Gemini board member comparing "Genesis' financial condition to that of Lehman Brothers before its collapse." New York prosecutors are seeking to permanently bar Gemini, Genesis, DCG, Silbert and various executives from securities and commodities work within New York, as well as restitution and disgorgement. "Hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn," New York attorney general Letitia James said in a statement. "Instead, Gemini hid the risks of investing with Genesis and Genesis lied to the public about its losses." It isn't the first time that James has targeted crypto firms. Earlier this year, her office sued Alex Mashinsky, the former CEO of bankrupt crypto exchange Celsius, alleging he defrauded hundreds of thousands of investors. Mashinsky was charged by federal prosecutors with fraud in July and faces prison if convicted. "We fully intend to fight the claims and look forward to being vindicated in this case," DCG said. "I am shocked by the baseless allegations in the Attorney General's complaint and intend to fight these claims in court. Honesty and integrity have always been my guiding principles," DCG CEO Barry Silbert said in a statement. "We wholly disagree with the NY AG's decision to also sue Gemini," Gemini said in a statement on X, formerly known as Twitter. "Blaming a victim for being defrauded and lied to makes no sense and we look forward to defending ourselves against this inconsistent position." The suit "confirms what we've been saying all along — that Gemini, Earn users, and other creditors were the victims of a massive fraud," the company added.
https://www.bbc.com/news/business-67161638.amp " Prosecutors said Genesis and DCG tried to hide the situation with financial manoeuvring and false reports, including to Gemini, while claiming publicly that its balance sheet was strong". Genesis and DCG were already facing fraud claims about those efforts from Gemini, a crypto exchange founded by the Winklevoss twins, who are known for claiming that their former Harvard classmate Mark Zuckerberg stole their idea to invent Facebook. Gemini said the lawsuit confirmed its claims against Genesis and it disagreed with being named as well. "Blaming a victim for being defrauded and lied to makes no sense and we look forward to defending ourselves against this inconsistent position," it said in a statement shared on social media. But according to the lawsuit, in the summer of 2022, some top Gemini staff became worried enough to withdraw their own funds."
Genesis bankruptcy stalls as creditors complain about ‘Kafkaesque’ process https://www.dlnews.com/articles/markets/genesis-bankruptcy-stalls-as-creditors-criticize-process/ A majority of Genesis creditors have objected to a proposed bankruptcy plan. Creditors have been frozen out by Genesis and have challenged its exclusive right to negotiate a deal. Thursday’s lawsuit against Genesis, parent company DCG, and Gemini by the New York State Attorney General was welcomed by creditors seeking answers. The Genesis bankruptcy is at an impasse as creditors say the bankrupt crypto lender is using oppressive tactics to force a deal. Genesis, which is owned by Digital Currency Group (DCG), filed for bankruptcy in January owing at least $3.4 billion to creditors. It initially tried to conduct a prepackaged bankruptcy by negotiating the terms of its plan before filing for Chapter 11, but this was unsuccessful. Now, nearly ten months later, creditors object to Genesis’ exclusive rights to negotiate a bankruptcy plan and are proposing an alternative path forward. The Fair Deal Group, one of the Genesis creditor groups, requested the Southern District of New York’s bankruptcy court end Genesis’ exclusivity on Thursday. “The only thing standing between a confirmed plan and an exit to these Chapter 11 cases is the Debtors, and their exclusive right to file a plan,” The Fair Deal Group said in a filing on Thursday. The group called Genesis’ proposed plan “dead on arrival,” as it would exempt Genesis executives from further litigation and would not sufficiently meet their demands. The negotiations between themselves, fellow creditor groups the Ad Hoc Group, Gemini, and other creditors led to “widespread agreement on all issues necessary to exit bankruptcy.” Those points included an agreement on how the estate’s assets would be distributed. An agreement on a term sheet for any potential deal with DCG was also reached, which laid out “critical” financial terms the creditors would accept. The final point laid out contingency plans in the event that DCG declined to accept the offer. The groups agreed to reject any “agreement in principle,” and instead take no deal if they weren’t happy with the terms proposed. This would give the creditors the opportunity to begin litigation against DCG instead. The Ad Hoc Group, one of the largest creditor groups, collected signatures from individual creditors expressing support for the above points. The signatures represented an “overwhelming supermajority of creditors,” the filing proposed by the Fair Deal Group said, adding that they account for “over 80% of every single class.” Genesis received details of the proposed plan on October 6 but failed to implement the creditors’ group plan. “Instead, since October 6, the Debtors [Genesis] have resorted to tactics that would make a Kafkaesque bureaucracy proud,” The Fair Deal Group filing said. In a statement to DL News, Genesis said it “continues to focus on maximising recoveries for creditors in its Chapter 11 cases.” DCG did not immediately respond to requests for comment. Sweeping litigation On Thursday, New York Attorney General Letitia James sued Genesis as well as Digital Currency Group and the Winklevoss twins’ crypto exchange Gemini. Genesis’s former CEO, Michael Moro, and DCG CEO Barry Silbert were also sued as part of the action. The attorney general said the firms defrauded more than 230,000 investors, almost 30,000 of them New Yorkers, of more than $1 billion. Gemini, Genesis, DCG, and Barry Silbert have all refuted the claims and stated their willingness to fight the matter in court. Genesis said the NYAG informed the firm of its intention to file the lawsuit “late yesterday.” While it said there is “no basis” for the state’s claims against Genesis, it has been “cooperating with all authorities and intends to continue doing so.” In a statement, Genesis claimed the NYAG has “risked significant harm to Genesis’s creditors” by rushing to file the lawsuit, and said it has expressed the reasons to the attorney general’s office “on multiple occasions.” One direct creditor, who is a member of the Ad Hoc Group and the Fair Deal Group and asked to remain anonymous, wrote to the bankruptcy judge on Friday to bring the NYAG lawsuit to his attention. “The lawsuit details blow-by-blow how Genesis as directed by their corporate parent DCG wilfully defrauded us,” the letter seen by DL News said. The NYAG has “done all the hard work for us,” the creditor told DL News. Other issues the creditor raised include Derar Islim’s continuing role as interim CEO of Genesis and the “forceful push” by Genesis and the official creditors committee towards a settlement. The current deal proposed is “basically a restructuring of the money DCG already owes us, but accompanied by full releases from fraud for Genesis management and DCG,” the creditor said. Contrast with FTX The Genesis bankruptcy process stands in stark contrast to the FTX bankruptcy. Attorney General James’ lawsuit “validates in exquisite detail with emails and meeting notes how I and other Genesis creditors were defrauded by Genesis and DCG, in much the same way the FTX customers had their money stolen by Sam Bankman-Fried,” the Genesis creditor told DL News. Sam Bankman-Fried is currently on trial charged with orchestrating a scheme to defraud investors in FTX. The US Securities and Exchange Commission said he concealed the diversion of FTX customer funds to crypto trading firm Alameda Research, which he also co-founded.