Cryptocurrency Platform Charged with $1 Billion Fraud

The New York Attorney General ("NYAG") sued a cryptocurrency platform and cryptocurrency lender for operating a fraudulent investment program.

In a Complaint filed in the Supreme Court of the State of New York, the NYAG said that the promoters touted the program as a high-yield investment whereby customers could profit by passively investing their cryptocurrencies. The NYAG alleged that the platform made false assurances that the program was a "highly liquid investment" and that the lender was creditworthy based on ongoing risk monitoring despite the fact that the platform's confidential risk reports revealed that the lender posed a high risk of default. The NYAG further alleged that the platform and lender disguised $1.1 billion in losses through a "months-long campaign of misstatements, omissions, and concealment." As a result, the NYAG charged that the investment program resulted in at least 232,000 investors losing over $1 billion to fraud.

The NYAG asserted that the charged entities violated New York General Business Law (a/k/a the "Martin Act"), New York Executive Law and state criminal laws. The NYAG asked the Court to (i) permanently enjoin the accused entities from engaging in fraudulent acts and from engaging in any business related to the issuance, distribution or exchange of securities and commodities and (ii) direct them to pay damages, restitution and disgorgement of all funds in connection with the illegal conduct.