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James had in October sued DCG, its Genesis Global Capital unit,
and Gemini Trust, the exchange run by twin brothers Cameron and
Tyler Winklevoss.
She claimed they caused more than $1 billion of losses by
misleading investors about the Gemini Earn program, which let
customers lend crypto assets to Genesis in exchange for a high
rate of return.
The attorney general said it had become clear as more investors
came forward that "the scam perpetrated by DCG through Genesis"
also ensnared investors who sent money directly to Genesis and
were falsely assured their money was safe.
Many of the additional investors were retail customers,
including a chiropractor and a stay-at-home father who each
invested $2 million of bitcoin with Genesis, the complaint said.
James is seeking more than $3 billion of restitution for the
more than 230,000 investors who she believes were defrauded.
"This illegal cryptocurrency scheme, and the horrific financial
losses that real people have suffered, are yet another reminder
of why stronger cryptocurrency regulations are needed to protect
all investors," James said in a statement.
DCG said Friday that James' lawsuit was "baseless" and that it
expects to win in court.
"DCG has always conducted its business lawfully and with
integrity, and DCG and Barry Silbert will be fully vindicated,"
it said in a statement.
Genesis is shutting down after filing for bankruptcy in January
2023.
Late Thursday, it reached a settlement with James' office,
agreeing to pay on her fraud claims so long as it fully repays
customers through the Chapter 11 process. That settlement
requires a bankruptcy judge's approval.
Representatives for DCG and Gemini did not immediately respond
to requests for comment.
Barry Silbert, who is DCG's chief executive, and Soichiro Moro,
a former Genesis chief executive, are also defendants.
Genesis filed for bankruptcy two months after halting
withdrawals by Gemini Earn customers following the collapse of
Sam Bankman-Fried's FTX cryptocurrency exchange.
Both Genesis and Gemini were also sued by the U.S. Securities
and Exchange Commission, which said they bypassed disclosure
requirements meant to protect Gemini Earn customers.
Last week, Genesis agreed to pay the SEC a $21 million fine,
also contingent on its repaying customers first.
Gemini, meanwhile, has sued DCG over their failure of their
crypto lending partnership.
(Reporting by Jonathan Stempel and Dietrich Knauth in New York;
Editing by Mark Porter, David Gregorio and David Ljunggren)
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