Crypto groups Gemini, Genesis and DCG sued for $1.1 billion in “fraud.”

“These cryptocurrency companies lied to investors and attempted to hide more than $1 billion in losses, and it was middle-class investors who suffered,” New York Attorney General Letitia James said in a statement. “Hard-working New Yorkers and investors across the country have lost more than a billion dollars because they were fed the blatant lie that their money would be safe and grow if they invested it in Gemini Earn.”

Gemini did not respond to a request for comment, but in one Post on X, formerly Twitter, said it looks forward to defending itself against the lawsuit. Neither Genesis nor DCG responded to requests for comment.

The lawsuit filed against the trio is the latest in a series of civil cases filed against crypto companies in the United States this year. In February, the SEC reached one settlement with another exchange, Kraken, agreeing to shut down a service that gave US customers the opportunity to earn rewards for locking their crypto. The regulator also warned cryptocurrency company Paxos of its intention to sue over its BUSD stablecoin, which the SEC said was a security and therefore required to comply with securities regulations. In June, the regulator filed charges against exchanges Binance and Coinbase on consecutive days, accusing both of violating securities laws.

A number of crypto founders were also in custody. Bankman-Fried was arrested in December, Alex Mashinsky of crypto lender Celsius in July and Su Zhu of Three Arrows Capital in September.

The press release states that the attorney general’s lawsuit seeks to stop Gemini, Genesis and DCG from doing business in New York and also seeks “compensation for all defrauded investors and the disgorgement of all ill-gotten gains.” But the impact of the lawsuit could also spill over into other areas of the crypto sector.

The case could lead to delays in the much-anticipated approval of a Bitcoin exchange-traded fund, a financial vehicle that would allow ordinary people to invest in Bitcoin through their regular stock broker, speculates Travis Kling, founder of Ikigai Asset Management, a crypto asset Management company. Another DCG subsidiary, Grayscale, is among the companies in line for approval. But it is “hard to imagine that there will be the first Bitcoin ETF.” [will come from Grayscale]“While these charges against the parent company are open, says Kling.

Given the extent to which DCG is enmeshed in the cryptosphere through its various venture investments, a conviction and a hefty financial penalty could also have secondary effects that are difficult to predict at this point, according to Stephen Diehl, a crypto-sceptic commentator. “It’s a huge holding company with connections to a large part of the American crypto industry,” says Diehl. “It’s a huge argument in the crypto center.”

Meanwhile, the prospect of further enforcement action against members of the crypto industry looms. “The last shoe hasn’t fallen,” says Klippsten. “Until the offshore, unregulated and opaque crypto companies are brought under control, I don’t think it will stop.”

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