Cryptocurrency exchange Gemini, founded by the Winklevoss twins, has filed a civil lawsuit against Digital Currency Group (DCG) and its CEO Barry Silbert. The lawsuit is rooted in a dispute over the insolvency of Genesis Capital, a firm with which Gemini had a significant business partnership.
Gemini co-founder Cameron Winklevoss announced the suit on social media, along with several allegations of fraud and foul play against Silbert for his role in hiding the troubles at Genesis.
DCG said in a statement that the allegations and the lawsuit are a “publicity stunt” by the Winklevoss twins to dodge responsibility for running the Gemini Earn program.
The firm said the allegations made against it and its employees are “baseless, defamatory, and completely false.” DCG added that it remains committed to finding an amicable solution for all parties involved in the bankruptcy proceedings.
The allegations
Winklevoss said the collapse of Three Arrows Capital “blew a $1.2 billion hole” in Genesis’ balance sheet — making it “wildly insolvent” as early as June 2022. However, instead of alerting investors and creditors, the firm hid this fact with the help of DCG and Silbert.
Said Winklevoss:
“Barry, DCG, and Genesis all conspired to create false financial reports to hide the truth from Gemini and creditors.”
Winklevoss claimed that the principal “architect and mastermind” of this “fraud” was Silbert and that the top leadership at DCG was aware and involved in “hiding the truth.”
The exchange facilitated its Earn program in collaboration with Genesis. However, when Genesis became insolvent, it halted withdrawals, effectively locking up approximately $1.45 billion worth of assets belonging to users of the Gemini Earn program
The exchange decided to end the program and asked DCG to repay the debt over five years.
According to the Gemini founder, Silbert directly intervened and tried to dissuade Gemini from ending its Earn program with Genesis despite knowing the company was essentially bankrupt. Silbert told the exchange the troubles at Genesis were temporary and stemmed from a “timing issue.”
Winklevoss alleged:
“This fraud goes to the very top. Barry Silbert and other DCG executives were directly involved in these lies and they lied again and again to conceal the truth from Gemini and other creditors.”
Genesis had told creditors everything was fine operationally because DCG had stepped in to cover the losses, but the latter never had any intention of absorbing the losses.
According to Winklevoss, DCG never provided any cover or “real capital” and instead gave Genesis a “sham” 10-year promissory note that had no real value . The firms then falsified financial documents to pretend it was a “receivable” with a value of $1.1 billion.
He said:
“One report pretended that this phony 10-YEAR promissory note was a ‘Current Asset.’ A total lie and complete misrepresentation.”
The troubles eventually culminated in Genesis filing for bankruptcy in January, six months after the firm allegedly became insolvent.
Gemini had set a July 6 deadline for DCG and Genesis to settle the repayment issue or it would pursue litigation. DCG, Genesis and Silbert are also being sued by various creditors of Genesis in a separate class-action lawsuit.
Winklevoss’s allegations against Silbert and DCG in these matters are allegations only and have not been proven.
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