Gemini, the cryptocurrency exchange founded by the wealthy Winklevoss brothers, has filed a legal complaint against Digital Currency Group (DCG) and its CEO and founder, Barry Silbert.
In a July 7 Twitter thread, Cameron Winklevoss of Gemini accused DCG and its CEO, Barry Silbert, of fraud and deception. According to Winklevoss, DCG and Silbert were involved in a scheme to hide Genesis’s insolvency and deceive creditors. DCG is the parent company of Genesis.
Silbert Hid “Gaping Hole on Genesis’s Balance Sheet”
Cameron Winklevoss has previously threatened to sue Silbert and DCG over the repayment of a $900 million loan after Genesis filed for bankruptcy. Gemini had a close connection to Genesis, and steered investors to the platform, through its Gemini Earn division.
In the complaint, Winklevoss claimed that when Gemini decided to terminate its Earn program in October 2022, Silbert contacted Gemini to convince the exchange to continue the program. “He did those knowing Genesis was massively insolvent,” claimed Winklevoss.
Genesis, the lender, powered Gemini Exchange’s Earn program, offering depositors yields of up to 8%. Depositors entrusted their funds to Genesis, which then lent them out to generate interest for Gemini’s customers.
In reality, Genesis had a gaping financial hole caused by the collapse of Three Arrows Capital (3AC). Instead of being honest about the losses, Genesis and DCG came up with a ruse, according to the complaint.
DCG allegedly pretended it had absorbed the losses of Genesis, and provided a ten-year promissory note with a low-interest rate. Genesis told its creditors and depositors that its parent company, DCG, had “absorbed” 3AC losses.
“This was a carefully crafted lie,” said Winklevoss on Twitter.
The crypto exchange founded by the Winklevoss brothers, Gemini, is one of many. Find out which one suits you best here: How to Choose The Right Crypto Exchange
DCG, Genesis “Conspired” Against Creditors
The complaint by Gemini alleges that the promissory note was simply an accounting trick. Designed to make it look as if the struggling company had positive equity. In doing so, Genesis appeared solvent without DCG actually having to provide the cash.
Winklevoss alleged that Genesis and DCG conspired to make false financial reports, misrepresenting the value of the promissory note. They allegedly then hid this from Gemini and other creditors. He further accused DCG executives, including Mark Murphy (then COO and current president), of being aware of the deception and not correcting the false reports.
The complaint provides multiple “falsified” balance sheets that appear to show DCG and Genesis attempting to hide their financial distress. According to Winklevoss, this fraud involves the “direct participation” and cooperation of Barry Silbert, DCG, and Genesis.
DCG hit back on Twitter within hours, calling the legal action “yet another publicity stunt… to deflect blame and responsibility.” The firm denied any suggestion of wrongdoing and confirmed it expected Genesis’s Chapter 11 bankruptcy proceedings to conclude soon.
In January, the SEC named Genesis and Gemini in a complaint accusing the pair of offering and selling unregistered securities through Gemini’s Earn program. In May, Gemini attempted to have the complaint thrown out, arguing it was beyond the regulator’s scope.
Trusted
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
