Cryptocurrency exchange Gemini, co-founded by the Winklevoss twins, has recently filed a civil lawsuit against Digital Currency Group (DCG) and its CEO, Barry Silbert. The legal action stems from a dispute concerning the insolvency of Genesis Capital, a company with which Gemini had a significant business partnership. Cameron Winklevoss, the co-founder of Gemini, took to social media to announce the lawsuit and make several allegations of fraud and misconduct against Silbert, accusing him of concealing the issues at Genesis.
In response, DCG issued a statement dismissing the allegations and the lawsuit as a mere “publicity stunt” by the Winklevoss twins to evade responsibility for their involvement in the Gemini Earn program. The firm firmly denies the accusations, deeming them “baseless, defamatory, and completely false.” DCG further expressed its commitment to finding a mutually agreeable solution for all parties involved in the bankruptcy proceedings.
The allegations put forth by Winklevoss include the claim that Three Arrows Capital’s collapse caused a significant financial deficit of $1.2 billion in Genesis’ balance sheet, rendering the company insolvent as early as June 2022. Rather than disclosing this information to investors and creditors, Winklevoss asserts that Genesis, with the assistance of DCG and Silbert, deliberately concealed the truth. He alleges that false financial reports were created to mask the company’s dire financial situation and that Silbert played a central role in orchestrating this fraudulent scheme, with the knowledge and involvement of DCG’s top leadership.
Gemini had collaborated with Genesis for its Earn program, which came to a halt when Genesis faced insolvency, resulting in the freezing of approximately $1.45 billion worth of assets belonging to users of the Gemini Earn program. In response, Gemini decided to terminate the program and requested DCG to repay the debt over a five-year period.
Winklevoss claims that Silbert directly intervened and attempted to dissuade Gemini from ending its partnership with Genesis, despite being aware of the company’s precarious financial state. Silbert purportedly assured Gemini that the problems faced by Genesis were temporary and arose from a timing issue. According to Winklevoss, this fraud extended to the highest levels of DCG. He alleges that Silbert and other DCG executives were directly involved in the deception, repeatedly lying to Gemini and other creditors in order to conceal the truth. While Genesis had informed creditors that DCG would cover the losses, Winklevoss asserts that DCG had no intention of assuming these losses.
Winklevoss also asserts that DCG never provided genuine capital coverage and instead issued a 10-year promissory note to Genesis, which he deems to be without real value. He claims that the firm falsified financial documents, misrepresenting the promissory note as a receivable with a value of $1.1 billion. He further highlights the fabrication of a report that classified this fictitious promissory note as a “Current Asset,” a complete misrepresentation of the facts. Ultimately, Genesis filed for bankruptcy in January, six months after allegedly becoming insolvent.
Gemini had set a deadline of July 6 for DCG and Genesis to resolve the repayment issue, warning that litigation would be pursued if an agreement was not reached. Furthermore, DCG, Genesis, and Silbert are facing a separate class-action lawsuit from various Genesis creditors. It is important to note that Winklevoss’s allegations against Silbert and DCG are currently unproven and remain as allegations at this stage.
