Gemini’s Winklevoss Claims Fraud, Calls for Removal of DCG Chief

cryptocurrency exchange Gemini Co-founder Cameron Winklevoss claimed that “Genesis has defrauded more than 340,000 Earn users” and called for the removal of the CEO of Genesis’s parent company, Digital Currency Group (DCG) Inc., amid the ongoing fight between the cryptocurrency companies that have emerged after the collapse of FTX.

key takeaways

  • Crypto Exchange Gemini co-founder Cameron Winklevoss claims Genesis Global Capital has defrauded more than 340,000 Gemini clients.
  • Winklevoss says that Genesis parent DCG was unable to pay Gemini, resulting in Gemini being unable to pay its customers.
  • Prosecutors are investigating DCG and some of its subsidiaries, though none have been accused of wrongdoing.

FTX Collpase is guilty

Gemini’s Earn product allows its clients to generate returns by lending their crypto assets to a borrowing counterparty. The fallout from FTX created financial problems for Genesis in November, as they $175 million in funds locked up with FTX.

That suspended repayments and new loans due to the collapse of FTX, and following the news, the Gemini crypto exchange, founded by the winklevoss twinsannounced delays in withdrawals for its Earn product, in which Genesis is a lending partner.

FTX contagion continued to spread through the market, and now Genesis is on the verge of collapse, heading for bankruptcy. The situation is certainly not good for Gemini since Genesis owes its customers over $900 million.

Silbert called ‘unfit’ to run DCG

After receiving no concrete assurances, the Winklevoss twins criticized Genesis’s parent company, Digital Currency Group.

“There is no way forward as long as Barry Silbert remains CEO of DCG,” Winklevoss wrote in the open letter. “He has demonstrated that he is unfit to lead DCG and that he is unwilling and unable to find a resolution with creditors that is both fair and reasonable.”

He claimed that DCG was unable to pay Gemini, which made Gemini unable to pay its customers. Winklevoss’s letter said that Silbert had a week to pay off the Gemini holders before things escalated.

Silbert said that DCG had submitted a proposal to Genesis and Winklevoss advisers on December 29, 2022, but received no response. He added: “DCG has never stopped paying interest to Genesis and is current on all outstanding loans.”

DCG under scrutiny

Since FTX collapsed in November 2022, DCG and some of its subsidiaries have come under increased scrutiny. Genesis Global Trade stopped withdrawals on November 10 after a public disclosure revealed Genesis had $175 million locked up in a frozen FTX trading account.

Prosecutors are investigating the transfers between DCG and a disputed subsidiary that offers cryptocurrency lending services. They are also looking into what investors were told about those transactions. As of press time, none have been accused of wrongdoing.

The bottom line

Due to the collapse of Capital of the three arrows last year, Genesis suffered heavy losses. The sudden and spectacular FTX failure in november further intensified the financial pressure. Genesis Global Capital, Genesis’s lending subsidiary, was hit particularly hard, preventing clients from withdrawing and obtaining new loans. A person familiar with the criminal investigation said Silbert’s empire was under investigation before FTX’s collapse.

DCG owns cryptocurrency mining service provider Foundry Digital, London-based exchange Luno, and cryptocurrency news outlet CoinDesk. CoinDesk was the first to report on FTX’s financial difficulties.

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