Home News Settling scores: AG Tish James gets some restitution for crypto victims

Settling scores: AG Tish James gets some restitution for crypto victims

New York Attorney General Tish James announced this week that her office had reached a $2 billion settlement with a series of cryptocurrency firms that had jointly run an investment program known as Gemini Earn. The firms had apparently concealed more than a billion dollars in losses from investors, defrauding some 29,000 New Yorkers.

The settlement will bar the companies from continuing to operate in the state and create a victims’ fund that will provide some money back to investors after creditors are paid. Creditor groups are separately pursuing action against the firms in bankruptcy court.

Up until just a couple years ago, the aggressive marketing around some of these crypto schemes was that you couldn’t lose — they were the future, and you had better get on the train or get left behind. For a while, it really seemed to work, but we know now that it often seemed this way only because customers were being defrauded. The trick of any Ponzi scheme is that the returns look great, at first.

While it’s unfortunate that it was necessary, we applaud James for working to clean up the mess and get some restitution for those left holding the bag. It probably won’t make everyone whole, but in addition to undoing some of the damage, hopefully this settlement will act as one more in a series of warnings to these fraudulent financial firms that they won’t get away with these scams for long.

The people behind Gemini — including Zuckerberg-antagonists-turned-crypto-hucksters the Winklevoss twins — have only faced civil penalties, such as earlier settlements with the New York Department of Financial Services and SEC penalties. Others crypto boosters have had a much rougher go, most infamously the FTX boy wonder Sam Bankman-Fried, whose “aw shucks” schtick failed to convince a jury last year. He is now serving a 25-year federal sentence for having defrauded customers out of billions.

We won’t go so far as to say there’s something inherently terrible about crypto as a concept, but it sure is interesting that the most spectacular and wide-ranging cases of corporate malfeasance in recent memory seem to have disproportionately featured this particular technology. This is in part a reflection of its appeal to bad actors as a sort of currency-that’s-not-a-currency, but also a black mark on law enforcement and regulators, who allowed this to grow into a series of multi-billion-dollar scams basically unfettered until several burst.

Let’s not make that mistake again. Hopefully, the authorities will be watching the remaining crypto companies like hawks, and quicker on the draw when it comes to the use of the technology as well as other technologies that might be used to pull a fast one on consumers. Almost everyone can agree that innovation is, in principle, a good thing. But hanging on the coattails of the new are often people who see it as an opportunity to add a veneer of excitement and opportunity to what is just a scheme.

Individual retail investors and consumers absolutely can and should make sure to do their own research, especially when it comes to deciding how to invest large amounts of money, but ultimately it is the job of law enforcement and regulators to stop these catastrophes before they happen.


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