New York Attorney General Letitia James has filed a lawsuit against cryptocurrency companies Gemini Trust Company (Gemini), Genesis Global Capital (Genesis), and Digital Currency Group (DCG), accusing them of defrauding investors of more than $1 billion. 

The lawsuit aims to ban these firms from the financial investment industry in New York and seeks restitution for investors.  “These cryptocurrency companies lied to investors and tried to hide more than a billion dollars in losses, and it was middle-class investors who suffered as a result,” said New York Attorney General James, who earlier this year labeled ether (ETH) a security.

The lawsuit centers around an investment program called “Gemini Earn,” which was a collaboration between Gemini and Genesis. The program allowed customers to lend crypto assets like Bitcoin to Genesis. Despite internal analyses indicating that Genesis was on shaky financial ground, Gemini promoted the program as a “low-risk investment,” according to information provided by the Attorney General’s office.

The lawsuit also implicates Genesis’ former CEO Soichiro Moro and DCG’s CEO Barry Silbert, accusing them of attempting to conceal over $1.1 billion in losses. These losses were largely shouldered by investors, leading to significant financial hardships for many. Among the affected were a retired 73-year-old grandmother who lost over $199,000 and a 56-year-old New Yorker who lost approximately $20,500, “virtually all his savings.”

The case also highlights a public dispute between the Winklevoss twins, who operate Gemini, and DCG’s CEO Barry Silbert. Earlier this year, Genesis filed for bankruptcy protection, and Gemini emerged as its largest creditor. 

The tension escalated to the point where Cameron Winklevoss, Gemini’s CEO, publicly demanded that Silbert step down, labeling him “unfit” to run DCG. Silbert retorted, calling it a “desperate and unconstructive publicity stunt.”

The lawsuit is part of a broader effort by the New York Attorney General to regulate the crypto industry more stringently. “This fraud is yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry,” James said. “My office will continue our efforts to stop deceptive cryptocurrency companies and push for stronger regulations to protect all investors.”