New York’s hardline approach to fraud: From Crypto to Trump
NYAG Letitia James has been at the forefront of legal actions against several cryptocurrency companies, demonstrating her office’s commitment to protecting investors and maintaining market integrity.
In a landmark ruling, former President Donald Trump has been fined $354 million by a New York court for fraudulent business practices, a decision that underscores New York Attorney General Letitia James’s stringent stance on fraud.
This fine, along with the barring of Trump and his sons from serving as officers in New York companies for up to three years, marks a significant chapter in James’s ongoing efforts to tackle financial misconduct.
Her rigorous stance against fraud in the digital asset space, marked by suing powerful cryptocurrency companies, has positioned her as a formidable figure in regulatory enforcement. James’s efforts have not only safeguarded investors but also underscored the urgent need for transparency and accountability within the crypto space.
This trajectory of impactful legal actions culminated in her landmark victory in a fraud case against former President Donald Trump, who is a leading candidate in the 2024 U.S. presidential election.
NYAG Letitia James aggressively tackling crypto space
James’s approach to combating fraud extends beyond real estate and traditional financial sectors, notably into the emerging field of cryptocurrency. She has been at the forefront of legal actions against several cryptocurrency companies, demonstrating her office’s commitment to protecting investors and maintaining market integrity.
Notably, James filed a lawsuit against cryptocurrency firms Gemini Trust Company, Genesis Global Capital, LLC, and Digital Currency Group, Inc., accusing them of defrauding over 230,000 investors, including thousands from New York, of more than $1 billion. This case highlights the risks associated with the rapidly evolving crypto market and underscores the importance of regulatory oversight to prevent financial fraud.
James expanded her lawsuit against DCG in February 2024, bringing the total alleged fraud to over $3 billion. This amended complaint was a result of additional investors coming forward with claims of being misled by the companies involved. James’s legal actions aim to ban the implicated firms from the financial investment industry in New York, seek restitution for defrauded investors, and enforce disgorgement of ill-gotten gains.
Additionally, in partnership with other state regulators, James sued Nexo Inc. and Nexo Capital Inc. for operating without proper registration and misleading investors about their regulatory status. This action is part of a broader effort to ensure that all financial entities, including those in the crypto space, adhere to established legal and regulatory frameworks.
DCG hired former Trump impeachment counsel
As part of its efforts to fight the NYAG lawsuit, Digital Currency Group, led by Barry Silbert, enlisted Barry Berke, a notable figure who served as chief impeachment counsel in the Senate trial of former President Donald Trump.
Berke, known for his legal expertise and role in high-profile cases, including representing former New York City Mayor Bill de Blasio, will defend the company against the civil lawsuit, which has been recently updated to a $3 billion fraud case.
“After months of false promises, we pulled the curtain back and revealed that DCG was lying to investors and defrauding them out of billions,” said Attorney General James in a statement. “The fraud and deceit were so expansive that many additional people have come forward to report similar harm.”
Letitia James proposed stricter regulations to address “rampant fraud and dysfunction”
In 2023, New York Attorney General Letitia James proposed a groundbreaking legislative bill aimed at imposing stricter regulations on the cryptocurrency industry. James highlighted the urgency of the bill, citing “rampant fraud and dysfunction” as common within the cryptocurrency sector.
She emphasized the necessity for regulatory safeguards to ensure investor confidence and legal compliance within the multi-billion-dollar industry. The proposed legislation would mandate independent audits of cryptocurrency exchanges, prevent ownership conflicts, align crypto platform responsibilities with those of banks under the Electronic Fund Transfer Act, and bolster the regulatory authority of the New York State Department of Financial Services (DFS) over digital assets.
The legislation, named the Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act, addresses the significant financial losses experienced by investors due to fraud, market manipulation, and lack of transparency in the cryptocurrency market. It particularly notes the disproportionate impact of these losses on lower-income households and minority communities, who have been heavily targeted and adversely affected by the volatility and regulatory gaps in the crypto industry.
The bill sets forth to curb conflicts of interest by prohibiting common ownership across crypto entities and imposing strict reporting requirements for financial statements to increase industry transparency. It also aims to enhance investor protections through measures such as enacting “know-your-customer” provisions, banning misleading terms like “stablecoin” unless backed by U.S. currency or high-quality liquid assets, and requiring platforms to reimburse customers for losses due to unauthorized or fraudulent asset transfers.
Comprehensive enforcement powers would be granted to the Attorney General to uphold the law, including issuing subpoenas, imposing penalties, and demanding restitution for investors. Additionally, the bill seeks to codify the authority of the DFS to license and oversee digital asset brokers, marketplaces, and advisors.
This legislation has received praise from regulators, policymakers, and community leaders, recognizing it as a critical step towards ensuring the cryptocurrency industry operates with greater accountability, transparency, and protection for investors, particularly those from vulnerable communities.
