BlockFi and Gemini Executives Subpoenaed in New Lawsuit Filed by Disgruntled Investor

BlockFi and Gemini Executives Subpoenaed in New Lawsuit Filed by Disgruntled Investor

An investor with nearly $2 million in assets frozen in failed cryptocurrency lender BlockFi has filed a class action lawsuit against its founders, two directors, and cryptocurrency exchange Gemini.

In a lawsuit filed on February 28 in the US District Court for the District of New Jersey, investor Trey Greene accused defendants for numerous crimes, including violation of consumer and exchange fraud laws, breach of fiduciary duties, and offering and selling unregistered securities.

“The unregistered securities sold by the BFI Defendants [BlockFi] on behalf of BlockFi were marketed and sold through a steady stream of material misrepresentations and omissions by Prince and Marquez over several years and through intermittent misrepresentations by defendant Gemini.”

Greene claims he invested more than $1.5 million in interest accounts that were purported to be unregistered securities, accruing more than $400,000 in capital gains and accrued interest that were reinvested.

However, he is currently unable to access the funds, after BlockFi froze all withdrawals on November 10, 2022, the same day FTX filed for bankruptcy.

Filing the proposed class action lawsuit. Source: Bloomberg Law

Greene further alleges that BlockFi founders Zac Prince and Flori Marquez induced him to purchase the “unregistered securities” by falsely claiming that the offerings were comparable to federally insured banking products.

While the Securities and Exchange Commission (SEC) had accused BlockFi of “failing to record offers and sales of its retail cryptocurrency lending product,” on Feb. 14, the filing claims that the exchange had “admitted that your accounts [de intereses] were unregistered securities” during the procedure that led to an agreement of $50 million on February 15.

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Tyler and Cameron Winkevoss’ Gemini had previously safeguarded BlockFi clients’ cryptocurrency holdings through its custodial services, and is alleged to have misrepresented clients’ access to these funds.

“Gemini knew of and acquiesced in the materially false and misleading statements about the condition, security, and accessibility of Claimant’s and group members’ assets in Gemini and about the risks of loss. Gemini provided materially false and misleading information to BlockFi to its use in the commercialization of BIAs [cuentas de interés BlockFi]”.

Gemini is alleged to have violated securities law, but was not included in the other charges.

Greene seeks damages for each of the alleged charges, including “triple damages” for violation of consumer fraud law, covering his attorneys’ expenses, full return of all funds purchased by defendants and interest earned, as well as a judgment preventing similar violations of consumer fraud law.

Represented in the class action lawsuit are all BlockFi shareholders who purchased their unregistered BlockFi interest accounts between March 4, 2019 and November 10, 2022.

Defendants will receive a summons and must respond to the complaint within 21 days of receipt or be required to pay the full amount claimed by Greene.

Cointelegraph has contacted Gemini and BlockFi but has not heard back as of press time.

Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

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Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.



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