Judge Denies Major Part of DCG's Motion to Dismiss NYAG Securities Fraud Lawsuit
A judge agreed to dismiss two lawsuits against DCG, its CEO Barry Silbert and Michael Moreau, the former head of Genesis Global Capital, saying they were duplicative.
Cheyenne Ligon | Updated by Nikhilesh De on April 11, 2025, 10:14 PM
Key points:
- A New York judge has allowed most of a civil securities fraud case against Digital Currency Group and its executives to proceed to trial.
- Attorney General Letitia James alleges DCG and others misled investors about Genesis' $1 billion losses related to the collapse of Three Arrows Capital.
A New York judge ruled Friday that a significant portion of Attorney General Letitia James' civil securities fraud lawsuit against cryptocurrency venture capital firm Digital Currency Group (DCG) and two of its executives can proceed to trial.
In 2023, James filed a lawsuit against DCG and its CEO Barry Silbert, DCG's now-bankrupt lending arm Genesis Global Capital and its former boss Michael Moreau, and cryptocurrency exchange Gemini, alleging that they jointly concealed a massive $1 billion hole in Genesis's balance sheet caused by the liquidation of Singapore-based crypto hedge fund Three Arrows Capital (3AC) in 2022.
James alleged that DCG and Genesis made “false representations” on social media that DCG had covered Genesis’s losses from the 3AC collapse, when in fact they had simply papered over the hole with a promissory note calling for Genesis to be paid $1.1 billion over 10 years at 1% interest. While DCG insisted the promissory note was legitimate, James’s lawsuit claimed that DCG “never made a single payment under the promissory note.”
While Gemini and Genesis both settled with the OAG, DCG, Silbert, and Moreau persisted. Last spring, DCG and the two executives filed motions to dismiss the lawsuit, arguing that the OAG had failed to present a valid claim—essentially arguing that they did not sell securities and therefore could not be held liable under New York state securities laws.
However, the judge in the case disagreed in her ruling Friday, noting that the attorney general, at least at this stage of the case, had reasonably argued that the Gemini Earn program — the now-defunct Gemini loan product that was liquidated in November 2022 and at the center of the James case — was a security.
However, Crane agreed to dismiss two of James's claims against DCG, Moreau and Silbert – one claim under the New York Executive Law that they engaged in a scheme to defraud in the first degree, and another that they engaged in conspiracy in the fifth degree – ruling that the claims were duplicative.
While Crane ruled the case could proceed, DCG said the fight was not over.
“As we have said from the outset, the allegations against DCG represent a tangled web of innuendo, misinterpretations, and unfounded inferences,” a DCG spokesperson told CoinDesk. “We are
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