DCG, Barry Silbert file motions to dismiss NYAG suit

Digital Currency Group and CEO Barry Silbert filed motions to dismiss in the New York Attorney General’s case against Gemini, Genesis, DCG and Silbert on Wednesday morning.

DCG argued in the filing that the allegations against the company are “plainly deficient.”

“As we have stated from the beginning, the allegations are a thin web of baseless innuendo, blatant mischaracterizations and unsupported conclusory statements,” DCG said in a statement to Blockworks.

The company pushed back against prior claims that the Gemini Earn loan agreements fall under the definition of securities under Howey. DCG argued that the claims fail to establish a third element, which would be necessary for the agreements to be considered securities.

Both the Securities and Exchange Commission and the NYAG alleged that the Earn program operated as an investment contract.

“If this case proceeds, the facts will show that DCG did nothing wrong, and that it acted properly, with the best of intentions, based on the sound, considered advice of accountants, investment bankers, consultants and other advisors from elite firms with the highest of reputations,” DCG claimed in the filing.

DCG said it “invested hundreds of millions of dollars” into Genesis after Three Arrows Capital collapsed.

“This is in addition to the $1.1 billion promissory note, which is a binding obligation, properly vetted and endorsed by DCG’s board of directors, accountants and other advisors that DCG remains committed to,” DCG said in a statement.

Silbert’s filing echoes a similar sentiment. The CEO’s legal team argued that he is not “alleged to have made any misrepresentations to anyone, nor to have had any involvement in how Genesis accounted for (or represented to others) DCG’s financial obligations to Genesis.”

DCG and Silbert’s statement said the lawsuit was an attempt by the NYAG to find a “headline-worthy scapegoat for losses caused by others.”

The NYAG initially filed the suit against the group in October of last year. Gemini and Genesis were accused of conspiring on two “fraudulent schemes” with the Gemini Earn product. DCG was accused of coordinating with the two to perpetuate the scheme.

“The Genesis Entities, [Michael] Moro, DCG and [Barry] Silbert disguised $1.1 billion in losses through a months-long campaign of misstatements, omissions and concealment,” the complaint alleged.

Last month, the NYAG announced that she was seeking $3 billion in restitution from Gemini and DCG for the alleged fraud. Bankrupt lender Genesis announced a settlement with the AG’s office, though DCG has since contested the settlement.

“Genesis’s proposed ‘settlement’ with the New York Attorney General is a back-door attempt to circumvent US bankruptcy law,” DCG said in a statement late last month.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.