The dispute between the New York Attorney General and the Digital Currency Group (DCG) continues to escalate.
What started as a $1 billion lawsuit has now grown into a whopping $3 billion lawsuit.
Hundreds of thousands of crypto investors are demanding $3 billion
This extreme increase comes as several institutional investors have filed new claims against Genesis, the major crypto lending company covered by the DCG.
DCG is now facing allegations of fraud and deception from hundreds of thousands of investors.
The fraud case is essentially based on the fact that both institutional and private investors feel deceived by the DCG.
They believe that the DCG-affiliated crypto companies had exaggerated the security of their investments. It now appears that the damage is much greater than initially thought.
DCG, Genesis and Gemini: heart of the lawsuit
The core of this lawsuit lies in the so-called “Earn” program of Gemini, the large crypto exchange run by the well-known Winklevoss twins.
Gemini and Genesis have teamed up and promised very “low risk” to investors in the Earn program. The program allows investors to earn returns by storing their cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) on Gemini. This means that you are essentially borrowing the cryptocurrency and receiving a return in return.
But then the crypto winter of 2022 began, a tough year for the market. Many prices dropped sharply and several companies collapsed, including major parties such as FTX, Terra (LUNA) and the aforementioned Genesis.
Partly because of Genesis’ bankruptcy, the dark side of the promises came to light. There were lots of parties over-indebted. They were, in a sense, playing with customer deposits, but when the market fell sharply, the losses became too great.
According to the DCG, the New York prosecutor, New York Attorney General Letitia James, is merely interested in sensationalism. However, James has achieved great success in this type of business in recent years.
A $3 billion drop would hit DCG hard and could lead to liquidity issues.
In addition to Genesis, CoinDesk, a well-known news platform, and Grayscale Investments, the world’s largest crypto fund manager, are also part of the DCG.