Crypto firms Digital Currency Group (DCG) and Gemini defrauded more than 230,000 investors out of a collective $1.1 billion, New York state prosecutors said in a lawsuit filed in Manhattan Thursday.

Prosecutors alleged that DCG and its subsidiaries and affiliates, including Genesis Global Capital and Genesis, lied to investors, created false financial documents and withheld information from creditors. 

One of Genesis's biggest counterparties was Sam Bankman-Fried's trading firm Alameda Research. By extension, prosecutors say, that meant that Gemini also had exposure to Alameda — and allegedly knew they did. 

Genesis' exposure to Sam Bankman-Fried's Alameda Research

New York prosecutors in the same suit accused Gemini of failing to address the "risky" exposure it had to Bankman-Fried's Alameda Research, through its relationship with Genesis. 

Gemini conducted risk analyses on Genesis' loan book that allegedly showed a major exposure to Alameda, as high as 60% at one unspecified point, and revised Genesis' internal creditworthiness to junk status, according to prosecutors. 

Gemini's alleged failure to manage risk

But in spite of those internal analyses, prosecutors say that Gemini didn't end its significant exposure to Genesis and Bankman-Fried, despite one Gemini board member comparing "Genesis' financial condition to that of Lehman Brothers before its collapse." 

It isn't the first time that James has targeted crypto firms. Earlier this year, her office sued Alex Mashinsky, the former CEO of bankrupt crypto exchange Celsius, alleging he defrauded hundreds of thousands of investors.  

Previous lawsuit against Celsius

DCG did not immediately respond to CNBC's request for comment. 

DCG's response

"We wholly disagree with the NY AG's decision to also sue Gemini," Gemini said in a statement on X, formerly known as Twitter. "Blaming a victim for being defrauded and lied to makes no sense and we look forward to defending ourselves against this inconsistent position." 

Gemini's response