Cryptocurrency exchange Gemini has taken the parent company of bankrupt digital lender Genesis, Digital Currency Group (DCG), and its CEO, Barry Silbert, to court. In a trial deposit Today (Friday) in a New York magistrates’ court, the exchange accused both sides 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 where they loaned their digital assets to Genesis in order to earn profits. However, Gemini, in cooperation with its parent company, lied about its “allegedly robust risk management practices,” Gemini alleged in its court filing.
Instead, Genesis “recklessly loaned huge sums to a counterparty (DCG and Silbert) knew they were using these huge sums to fuel a risky arbitrage trading strategy,” Gemini claimed. In November, following FTX’s collapse and ensuing bankruptcy filing in New York, Genesis suspended the withdrawal from its platform, citing “unprecedented market turbulence”. The lender even solicited a $1 billion emergency loan from investors.
In the court filing, Gemini said Genesis, as a result of this exposure, defaulted on its debt to Earn Program lenders. Cameron Winklevoss, the co-founder of Gemini, previously claimed that DCG owes its clients more than $900 million. On Tuesday, the CEO even offered a “best and last offer” of $1.47 billion in installment repayments to Gemini, to be completed by 2028.
Hey @BarrySilbertI’d like to invite you to a Twitter space to discuss our best and latest offering.
No lawyers. No advisors. Just friends. I know Earn users would love to hear from you. You can be the first to tell them if you agree to the deal.
Let me know when you’re free! https://t.co/EfL9lw2PNe
—Cameron Winklevoss (@cameron) July 5, 2023
DCG lied about absorbing 3AC losses from Genesis: Gemini
In its complaint, Gemini said it wanted to recover damages and losses it had accrued as a direct result of Silbert’s “false, misleading and incomplete statements and omissions” to its business. Specifically, Gemini argued that the DGC founder “misrepresented” that the parent company had absorbed, through a $1.1 billion injection, losses totaling $1.2 billion that Genesis had suffered due to its exposure to the now bankrupt crypto lender Three Arrow Capital (3AC). Ultimately, Silbert allegedly revealed that the supposed infusion was a promissory note that could not be activated until 2032.
“Silbert knew that Genesis was massively insolvent, but did not disclose this fact to Gemini,” the cryptocurrency exchange said. “Indeed, Silbert went far beyond this fraudulent omission, representing to Gemini that, although the Genesis loan portfolio was ‘complex,’ it could be successfully unwound within a reasonable time.”
Gemini added: “That is, Silbert told Gemini that Genesis only faced a short-term mismatch in the timing of its loan portfolio, hiding the reality that Genesis had a massive hole. in its balance sheet and would be unable to meet its obligations to Gemini and others because DCG had not actually taken on the 3AC losses.”
Since Genesis filed for bankruptcy protection in January 2023, Gemini has been working with the cryptocurrency lender “on a consensual restructuring” that would maximize lender Gemini Earn’s recovery “without an extended delay,” Gemini noted. The exchange added that it was separately pursuing its case against Genesis in the digital lender’s bankruptcy case.
Gemini and DCG Trade Blames
Sharing excerpts from the court filing on Twitter on Friday, Winklevoss said the “fraud” committed against Gemini “goes to the highest level.”
“DCG – and Barry personally – are direct participants in the fraud that damaged Gemini and hundreds of thousands of Earn users,” Winklevoss wrote. “This complaint is an important step in holding them accountable for what they have done.”
9/ This fraud goes all the way to the top. Barry Silbert and other DCG executives were directly implicated in these lies and they 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 posted to Twitter on Friday, DCG called Gemini’s lawsuit “yet another publicity stunt by Cameron Winklevoss to deflect blame and responsibility away from himself and Gemini, who ran the Gemini Earn program.”
“Any suggestion of wrongdoing by DCG or any of its employees is baseless, defamatory and completely untrue,” DCG added.
DCG statement: pic.twitter.com/Mz9EMTPgLT
— Digital Currency Group (@DCGco) July 7, 2023
Meanwhile, both Gemini and Genesis were sued in January by the U.S. Securities and Exchange Commission, which claims the conflicting companies offered unregistered securities to the public through their crypto lending products. At the end of 2022, a certain group of investors also hit Gemini with a class action lawsuit against the Earn program which promised up to 7.4% return to customers for lending their digital assets.
Cryptocurrency exchange Gemini has taken the parent company of bankrupt digital lender Genesis, Digital Currency Group (DCG), and its CEO, Barry Silbert, to court. In a trial deposit Today (Friday) in a New York magistrates’ court, the exchange accused both sides 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 where they loaned their digital assets to Genesis in order to earn profits. However, Gemini, in cooperation with its parent company, lied about its “allegedly robust risk management practices,” Gemini alleged in its court filing.
Instead, Genesis “recklessly loaned huge sums to a counterparty (DCG and Silbert) knew they were using these huge sums to fuel a risky arbitrage trading strategy,” Gemini claimed. In November, following FTX’s collapse and ensuing bankruptcy filing in New York, Genesis suspended the withdrawal from its platform, citing “unprecedented market turbulence”. The lender even solicited a $1 billion emergency loan from investors.
In the court filing, Gemini said Genesis, as a result of this exposure, defaulted on its debt to Earn Program lenders. Cameron Winklevoss, the co-founder of Gemini, previously claimed that DCG owes its clients more than $900 million. On Tuesday, the CEO even offered a “best and last offer” of $1.47 billion in installment repayments to Gemini, to be completed by 2028.
Hey @BarrySilbertI’d like to invite you to a Twitter space to discuss our best and latest offering.
No lawyers. No advisors. Just friends. I know Earn users would love to hear from you. You can be the first to tell them if you agree to the deal.
Let me know when you’re free! https://t.co/EfL9lw2PNe
—Cameron Winklevoss (@cameron) July 5, 2023
DCG lied about absorbing 3AC losses from Genesis: Gemini
In its complaint, Gemini said it wanted to recover damages and losses it had accrued as a direct result of Silbert’s “false, misleading and incomplete statements and omissions” to its business. Specifically, Gemini argued that the DGC founder “misrepresented” that the parent company had absorbed, through a $1.1 billion injection, losses totaling $1.2 billion that Genesis had suffered due to its exposure to the now bankrupt crypto lender Three Arrow Capital (3AC). Ultimately, Silbert allegedly revealed that the supposed infusion was a promissory note that could not be activated until 2032.
“Silbert was aware that Genesis was massively insolvent, but did not disclose this fact to Gemini,” the cryptocurrency exchange said. “Indeed, Silbert went far beyond this fraudulent omission, representing to Gemini that, although the Genesis loan portfolio was ‘complex,’ it could be successfully unwound within a reasonable time.”
Gemini added: “That is, Silbert told Gemini that Genesis only faced a short-term mismatch in the timing of its loan portfolio, hiding the reality that Genesis had a massive hole. in its balance sheet and would be unable to meet its obligations to Gemini and others because DCG had not actually taken on the 3AC losses.”
Since Genesis filed for bankruptcy protection in January 2023, Gemini has been working with the cryptocurrency lender “on a consensual restructuring” that would maximize lender Gemini Earn’s recovery “without an extended delay,” Gemini noted. The exchange added that it was separately pursuing its case against Genesis in the digital lender’s bankruptcy case.
Gemini and DCG Trade Blames
Sharing excerpts from the court filing on Twitter on Friday, Winklevoss said the “fraud” committed against Gemini “goes to the highest level.”
“DCG – and Barry personally – are direct participants in the fraud that damaged Gemini and hundreds of thousands of Earn users,” Winklevoss wrote. “This complaint is an important step in holding them accountable for what they have done.”
9/ This fraud goes all the way to the top. Barry Silbert and other DCG executives were directly implicated in these lies and they 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 posted to Twitter on Friday, DCG called Gemini’s lawsuit “yet another publicity stunt by Cameron Winklevoss to deflect blame and responsibility away from himself and Gemini, who ran the Gemini Earn program.”
“Any suggestion of wrongdoing by DCG or any of its employees is baseless, defamatory and completely untrue,” DCG added.
DCG statement: pic.twitter.com/Mz9EMTPgLT
— Digital Currency Group (@DCGco) July 7, 2023
Meanwhile, both Gemini and Genesis were sued in January by the U.S. Securities and Exchange Commission, which claims the conflicting companies offered unregistered securities to the public through their crypto lending products. At the end of 2022, a certain group of investors also hit Gemini with a class action lawsuit against the Earn program that promised up to 7.4% return to customers for lending their digital assets.
