Cryptocurrency exchange Gemini has dragged the parent company of bankrupt digital lender Genesis, Digital Currency Group (DCG), and its CEO, Barry Silbert, into court. in the suit foot Today (Friday) before a New York court, the exchange accused both parties of “encouraging and facilitating” Genesis fraud against the company.
According to the New York-based exchange, thousands of its users signed up for the Gemini Earn Program under which they lent their digital assets to Genesis in order to turn a profit. However, Gemini lied about cooperating with its parent company about its “allegedly strong risk management practices,” Gemini alleged in the court filing.
Instead, Genesis “was recklessly lending huge amounts of money to a counterparty (DCG and Silbert) who knew it was using these huge sums to fuel a risky arbitrage trading strategy,” Gemini alleged. In November, after the collapse of FTX and the subsequent bankruptcy filing in New York, Genesis paused withdrawals on its platform, citing “unprecedented market turmoil”. The lender even sought a $1 billion emergency loan from the investors.
In the lawsuit, Gemini said that as a result of this exposure, Genesis failed to pay its debt to the Earn Program lenders. Gemini co-founder Cameron Winklevoss previously claimed that DCG owed its clients more than $900 million. On Tuesday, the CEO even proposed an “ultimate best offer” of $1.47 billion in phased payments for Gemini, to be completed by 2028.
Hey @employeeI’d like to invite you to the Twitter Space to discuss our final best show.
No lawyers. No advisors. just friends. I know earners would love to hear from you. You can be the first to tell them if you accept the deal.
Let me know when you are free! https://t.co/EfL9lw2PNe
– Cameron Winklevoss (@cameron) July 5, 2023
DCG lied about absorbing the losses of Genesis’ 3AC: Gemini
In its complaint, Gemini said it wanted to recover damages and losses it suffered as a direct result of Silbert’s “false, misleading, and incomplete” representations and omissions to her company. Specifically, Gemini alleged that DGC’s founder ‘falsely presented’ that the parent company had absorbed, through a $1.1 billion infusion, losses totaling $1.2 billion incurred by Genesis due to its exposure to cryptocurrency lender Three Arrow Capital (3AC). In the end, Silbert reveals that the supposed leak was an inoperable promissory note until the year 2032.
“Silbert knew that Genesis was significantly insolvent, but he did not disclose this fact to Gemini,” the cryptocurrency exchange said. “In fact, Silbert went so far as to make this fraudulent omission, presenting to Gemini that although Genesis’ loan portfolio was ‘complex’, it could be successfully eliminated within a reasonable time.”
Gemini added, “That said, Silbert told Gemini that Genesis only experienced a short-term mismatch in the timing of its loan portfolio, masking the fact that Genesis has a large hole on its balance sheet and will not be able to meet its obligations to Gemini and others, because DCG has not in fact incurred 3AC losses.”
Since Genesis filed for bankruptcy protection in January 2023, Gemini has worked with the cryptocurrency lender “on a consensual restructuring” that would maximize the recovery of the Gemini Earn lender “without much delay,” Gemini noted. The exchange added that it is pursuing its case separately against Genesis in the digital lender’s bankruptcy case.
Gemini and DCG trade the blame
The “fraud” perpetrated against Gemini “goes over the top,” said Winklevoss, who shared excerpts from the court filing on Twitter on Friday.
“DCG – and Barry personally – are direct participants in the scam that destroyed Gemini and hundreds of thousands of Earn users,” Winklevoss wrote. “This complaint is an important step in holding them accountable for what they did.”
9/ This scam goes to the top. Barry Silbert and other DCG executives were directly involved in these lies and lied again and again to hide the truth from Gemini and other creditors. pic.twitter.com/DLW41mm3YP
– Cameron Winklevoss (@cameron) July 7, 2023
In a statement released on Twitter Friday, DCG called Gemini’s suit “another publicity stunt by Cameron Winklevoss to deflect blame and responsibility from himself and Gemini, who runs the Gemini Earn program.”
DCG added, “Any suggestion of wrongdoing on the part of DCG or any of its employees is unfounded, defamatory, and completely wrong.”
DCG statement: pic.twitter.com/Mz9EMTPgLT
Digital Currency Group (DCGco) July 7, 2023
Meanwhile, both Gemini and Genesis were sued in January by the US Securities and Exchange Commission that alleged that the feuding companies offered unregistered securities to the public through crypto lending products. In late 2022, a certain group of investors also hit Gemini with a class-action lawsuit over an Earn program that promised customers up to 7.4% of proceeds for lending their digital assets.
Cryptocurrency exchange Gemini has dragged the parent company of bankrupt digital lender Genesis, Digital Currency Group (DCG), and its CEO, Barry Silbert, into court. in the suit foot Today (Friday) before a New York court, the exchange accused both parties of “encouraging and facilitating” Genesis fraud against the company.
According to the New York-based exchange, thousands of its users signed up for the Gemini Earn Program under which they lent their digital assets to Genesis in order to turn a profit. However, Gemini lied about cooperating with its parent company about its “allegedly strong risk management practices,” Gemini alleged in its court filing.
Instead, Genesis “was recklessly lending huge amounts of money to a counterparty (DCG and Silbert) who knew it was using these huge sums to fuel a risky arbitrage trading strategy,” Gemini alleged. In November, after the collapse of FTX and the subsequent bankruptcy filing in New York, Genesis paused withdrawals on its platform, citing “unprecedented market turmoil”. The lender even sought a $1 billion emergency loan from the investors.
In the lawsuit, Gemini said that as a result of this exposure, Genesis failed to pay its debt to the Earn Program lenders. Gemini co-founder Cameron Winklevoss previously claimed that DCG owed its clients more than $900 million. On Tuesday, the CEO even proposed an “ultimate best offer” of $1.47 billion in phased payments for Gemini, to be completed by 2028.
Hey @employeeI’d like to invite you to the Twitter Space to discuss our final best show.
No lawyers. No advisors. just friends. I know earners would love to hear from you. You can be the first to tell them if you accept the deal.
Let me know when you are free! https://t.co/EfL9lw2PNe
– Cameron Winklevoss (@cameron) July 5, 2023
DCG lied about absorbing the losses of Genesis’ 3AC: Gemini
In its complaint, Gemini said it wanted to recover damages and losses it suffered as a direct result of Silbert’s “false, misleading, and incomplete” representations and omissions to her company. Specifically, Gemini alleged that DGC’s founder ‘falsely presented’ that the parent company had absorbed, through a $1.1 billion infusion, losses totaling $1.2 billion incurred by Genesis due to its exposure to cryptocurrency lender Three Arrow Capital (3AC). In the end, Silbert reveals that the supposed leak was an inoperable promissory note until the year 2032.
“Silbert knew that Genesis was significantly insolvent, but he did not disclose this fact to Gemini,” the cryptocurrency exchange said. “In fact, Silbert went so far as to make this fraudulent omission, presenting to Gemini that although Genesis’ loan portfolio was ‘complex’, it could be successfully eliminated within a reasonable time.”
Gemini added, “That said, Silbert told Gemini that Genesis only experienced a short-term mismatch in the timing of its loan portfolio, masking the fact that Genesis has a large hole on its balance sheet and will not be able to meet its obligations to Gemini and others, because DCG has not in fact incurred 3AC losses.”
Since Genesis filed for bankruptcy protection in January 2023, Gemini has worked with the cryptocurrency lender “on a consensual restructuring” that would maximize the recovery of the Gemini Earn lender “without much delay,” Gemini noted. The exchange added that it is pursuing its case separately against Genesis in the digital lender’s bankruptcy case.
Gemini and DCG trade the blame
The “fraud” perpetrated against Gemini “goes over the top,” said Winklevoss, who shared excerpts from the court filing on Twitter on Friday.
“DCG – and Barry personally – are direct participants in the scam that destroyed Gemini and hundreds of thousands of Earn users,” Winklevoss wrote. “This complaint is an important step in holding them accountable for what they did.”
9/ This scam goes to the top. Barry Silbert and other DCG executives were directly involved in these lies and lied again and again to hide the truth from Gemini and other creditors. pic.twitter.com/DLW41mm3YP
– Cameron Winklevoss (@cameron) July 7, 2023
In a statement released on Twitter Friday, DCG called Gemini’s suit “another publicity stunt by Cameron Winklevoss to deflect blame and responsibility from himself and Gemini, who runs the Gemini Earn program.”
DCG added, “Any suggestion of wrongdoing on the part of DCG or any of its employees is unfounded, defamatory, and completely wrong.”
DCG statement: pic.twitter.com/Mz9EMTPgLT
Digital Currency Group (DCGco) July 7, 2023
Meanwhile, both Gemini and Genesis were sued in January by the US Securities and Exchange Commission that alleged that the feuding companies offered unregistered securities to the public through crypto lending products. In late 2022, a certain group of investors also hit Gemini with a class-action lawsuit over an Earn program that promised customers up to 7.4% of proceeds for lending their digital assets.
