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

A New York choose dominated Friday that almost all of New York Attorney General Letitia James’ civil securities fraud swimsuit towards crypto enterprise agency Digital Currency Group (DCG) and two of its executives can proceed to trial.

In 2023, James sued James sued DCG and its CEO Barry Silbert, DCG’s now-bankrupt lending arm Genesis Global Capital and its former CEO Michael Moro and crypto trade Gemini, alleging that they labored collectively to cowl up a gaping $1 billion gap in Genesis’ steadiness sheet brought on by the wipe-out of Singapore-based crypto hedge fund Three Arrows Capital (3AC) in 2022.

James mentioned DCG and Genesis made “false assurances” on social media that DCG had absorbed Genesis’ losses from 3AC’s implosion when, in actual fact, that they had simply papered over the opening with a promissory word, pleading to pay Genesis $1.1 billion over 10 years at a 1% rate of interest. While DCG has adamantly maintained that the promissory word was authentic, James’ swimsuit claimed that DCG has “never made a single payment under the Note.”

While Gemini and Genesis each settled with the OAG, DCG, Silbert and Moro have fought them tooth and nail. Last spring, DCG and each executives filed motions to dismiss the swimsuit, alleging that the Office of the Attorney General (OAG) had failed to state a declare — basically arguing that they weren’t promoting securities and thus shouldn’t be sued beneath New York State securities legal guidelines.

But the choose presiding over the case disagreed in her Friday ruling, writing that the OAG had, not less than on the present stage of the case, adequately alleged that the Gemini Earn program — the now-defunct Gemini lending product that went belly-up in November 2022 and which sits on the heart of James’ case — was a safety.

Crane did, nevertheless, agree to toss out two of James’ claims towards DCG, Moro and Silbert — one declare beneath New York’s Executive Law that they engaged in a scheme to defraud within the first diploma, and one other that they engaged in a conspiracy within the fifth diploma — ruling that these claims had been duplicative.

Though Crane dominated the case can proceed, DCG mentioned it isn’t achieved preventing.

“As we have stated from the beginning, the allegations against DCG are a thin web of innuendo, mischaracterizations, and unsupported conclusions,” a spokesperson for DCG informed CoinDesk. “We’re encouraged by the judge’s dismissal of the New York Attorney General’s most outrageous claims based on alleged violations of criminal fraud and conspiracy statutes. We will continue to fight this baseless lawsuit as we remain focused on our mission in support of the digital assets industry.”