Gemini co-founder Cameron Winklevoss has released a lengthy letter alleging that Genesis and its parent company, Digital Currency Group (DCG), defrauded Gemini and over 340,000 Gemini Earn users. The letter also levies substantial allegations of fraud against Barry Silbert and other key personnel of the companies.
The letter alleges that after Genesis Global Capital LLC, the $2.8 billion crypto lending arm of Genesis Trading, incurred losses of at least $1.2 billion as a result of the hedge fund’s Three Arrows Capital cryptocurrency. collapseinstead of taking steps to restructure and protect users, the fund tried to deceive others into believing that $1.2 billion in working capital had been pumped into the company.
Instead, however, the firm reportedly marked a 10-year promissory note as a current asset, which “normally refers to cash, cash equivalents, or other assets that can be exchanged for cash. within one year,” according to the letter. However, Winklevoss writes that “a promissory note with repayment of principal due in 10 years does not meet the definition of a ‘current asset’ by a country mile.”
Winklevoss also describes how Genesis allegedly loaned to Three Arrows Capital without considering the risk of those loans, as the crypto hedge fund apparently redirected investments to Grayscale Investments’ GBTC, which limited the Trust’s growing discount. This risk was then transferred to Gemini Earn users.
The letter claims that greed is ultimately what drove these investment decisions and, apparently, the loss of Gemini Earn users’ funds. The letter ends with a paragraph that reads, “There is no way forward as long as Barry Sibert remains CEO of DCG. He proved unfit to lead DCG and reluctant and unable to find a solution with creditors that was both fair and reasonable. As a result, Gemini, acting on behalf of 340,000 users, is asking the board to remove Barry Silbert as CEO with immediate effect and install a new CEO, who will right the wrongs that occurred under Barry’s leadership.
Although bitcoins held by custodians can be frozen and stolen, it should be noted that bitcoins properly kept in cold storage cannot be, as this letter claims. Gemini Earn users introduced third-party risk and unnecessary trust when they held their funds on this platform, which then brazenly loaned out said entrusted funds. Bitcoiners should clarify to those unfamiliar with the differences between these platforms and their risks and proper bitcoin self-custody storage.
In response to the letter, the DCG Twitter account posted a official statementembedded below.