Judge Rules Against Most of DCG’s Motion to Dismiss NYAG’s Civil Securities Fraud Suit

A New York justice ruled Friday that the bulk of New York Attorney General Letitia James’ civilian securities fraud suit against crypto task steadfast Digital Currency Group (DCG) and 2 of its executives tin proceed to trial.

In 2023, James sued James sued DCG and its CEO Barry Silbert, DCG’s now-bankrupt lending limb Genesis Global Capital and its erstwhile CEO Michael Moro and crypto speech Gemini, alleging that they worked unneurotic to screen up a gaping $1 cardinal spread successful Genesis’ equilibrium expanse caused by the wipe-out of Singapore-based crypto hedge money Three Arrows Capital (3AC) successful 2022.

James said DCG and Genesis made “false assurances” connected societal media that DCG had absorbed Genesis’ losses from 3AC’s implosion when, successful fact, they had conscionable papered implicit the spread with a promissory note, pleading to wage Genesis $1.1 cardinal implicit 10 years astatine a 1% involvement rate. While DCG has adamantly maintained that the promissory enactment was legitimate, James’ suit claimed that DCG has “never made a azygous outgo nether the Note.”

While Gemini and Genesis some settled with the OAG, DCG, Silbert and Moro person fought them bony and nail. Last spring, DCG and some executives filed motions to disregard the suit, alleging that the Office of the Attorney General (OAG) had failed to authorities a assertion — essentially arguing that they were not selling securities and frankincense should not beryllium sued nether New York State securities laws.

But the justice presiding implicit the lawsuit disagreed successful her Friday ruling, penning that the OAG had, astatine slightest astatine the existent signifier of the case, adequately alleged that the Gemini Earn programme — the now-defunct Gemini lending merchandise that went belly-up successful November 2022 and which sits astatine the halfway of James’ lawsuit — was a security.

Crane did, however, hold to flip retired 2 of James’ claims against DCG, Moro and Silbert — 1 assertion nether New York’s Executive Law that they engaged successful a strategy to defraud successful the archetypal degree, and different that they engaged successful a conspiracy successful the 5th grade — ruling that those claims were duplicative.

Though Crane ruled the lawsuit tin proceed, DCG said it isn’t done fighting.

“As we person stated from the beginning, the allegations against DCG are a bladed web of innuendo, mischaracterizations, and unsupported conclusions,” a spokesperson for DCG told CoinDesk. “We’re encouraged by the judge’s dismissal of the New York Attorney General’s astir outrageous claims based connected alleged violations of transgression fraud and conspiracy statutes. We volition proceed to combat this baseless suit arsenic we stay focused connected our ngo successful enactment of the integer assets industry.”