Nearly a year after the collapse of Sam Bankman-Fried's crypto empire, the repercussions are still reverberating throughout the digital asset industry. On Thursday, New York's attorney general

filed a lawsuit against three digital asset companies that were entangled in the fall of Bankman-Fried's empire last autumn. These companies are Gemini Trust, Genesis Global Capital, and Digital Currency Group, the parent company of Genesis. The lawsuit alleges that these firms deceived investors and concealed over $1 billion in losses.

The Attorney General's office stated that its investigation uncovered deceptive practices by Gemini, a crypto firm founded by Cameron and Tyler Winklevoss. Gemini Earn, a program that allowed customers to lend crypto assets to Genesis while earning interest payments as high as 8%, was marketed as a low-risk investment. However, it deceived investors about the significant risks involved.

Attorney General Letitia James remarked, "These cryptocurrency companies lied to investors, and it was middle-class investors who suffered as a result." Among the 230,000 investors who lost money, at least 29,000 were New Yorkers.

This lawsuit is the latest effort by US officials to regulate the trillion-dollar crypto industry, which has long operated outside the scope of traditional financial regulations. Cryptocurrency advocates argue that regulators have been slow in establishing guidelines for digital assets, which they consider distinct from traditional securities like stocks or bonds.

Following the FTX crash, Genesis froze customer redemptions in its lending unit due to market turmoil and later filed for bankruptcy. The lawsuit alleges that Gemini was aware of the risks of investing with Genesis, which were, at one point, "highly concentrated" with Bankman-Fried's crypto trading house, Alameda Research.

The lawsuit also names former Genesis CEO Soichiro "Michael" Moro and Digital Currency Group CEO Barry Silbert. Gemini's owners, the Winklevoss twins, have stated that Genesis owed more than $900 million to some 340,000 customers using the Earn program.

In response to the lawsuit, Gemini claimed that it was the victim of a "massive fraud" and disagreed with the lawsuit's allegations. Genesis stated that it had not violated the law and would continue cooperating with authorities while focusing on maximizing recoveries for creditors in its Chapter 11 cases. Photo by AntanaCoins, Wikimedia commons.