On February 28, Trey Greene, an investor with approximately $2 million worth of funds frozen in the bankrupt cryptocurrency lender BlockFi, filed a class action complaint against its founders, two directors, and crypto exchange Gemini in the U.S. District Court for the District of New Jersey. However, Greene alleged the defendants had violated consumer fraud and exchange acts, breached fiduciary duties, and offered and sold unregistered securities.
“The unregistered securities sold by the BFI [BlockFi] Defendants on behalf of BlockFi were marketed and sold via a steady stream of misrepresentations and material omissions by Prince and Marquez over several years and through intermittent misrepresentations by Defendant Gemini.”
Trey Greene in a proposed class action lawsuit
Greene claims to have invested over $1.5 million in interest accounts, which are alleged to be unregistered securities that yielded capital gains and earned interest amounting to more than $400,000. Unfortunately, he can no longer withdraw the funds after BlockFi froze all withdrawals on Nov. 10 — coinciding with FTX’s filing for bankruptcy.
The Securities and Exchange Commission (SEC) charged BlockFi with failing to register the offers and sales of its retail crypto lending product on February 14. In response, Greene asserts that he was misled by BlockFi founders Zac Prince and Flori Marquez into buying unregistered securities that they presented as being comparable to federally-insured bank products. During the proceedings, BlockFi admitted that their interest accounts were unregistered securities, leading to a settlement of $50 million on February 15.
Tyler Winklevoss’ Gemini reportedly held custody of BlockFi’s customers’ crypto funds through its custodial services but is said to have falsely represented the level of access clients had to these assets. According to the lawsuit, Gemini was aware of, and approved of, misinforming statements about the security and availability of investments at Gemini, and the risk of loss associated with them. Gemini also allegedly supplied misleading information to BlockFi which was then used in marketing its BlockFi Interest Accounts (BIAs).
Greene is bringing a class action lawsuit against Gemini and other defendants over allegations of breaching the exchange act. The claims include “treble damages” for breaking the consumer fraud act, attorney’s fees to be covered, refunds given on all funds acquired by the defendants with accrued interest, and a judgment preventing similar violations in the future.
The class of individuals represented in the lawsuit consists of any BlockFi stockholders who purchased BlockFi unregistered BlockFi Interest Accounts between March 4, 2019, and November 10, 2022. The defendants have been served a summons and must respond to the complaint within 21 days or be required to pay the full amount specified in Greene’s claim.
