Gemini has filed an explosive legal claim against Digital Currency Group (DCG) and its CEO, Barry Silbert. The Winklevoss twins exchange accuses DCG and Silbert of fraud and deceit, as well as of misleading creditors. Cameron Winklevoss argues that the companies used a DCG promissory note to hide Genesis’ insolvency.
Gemini, the cryptocurrency exchange founded by the Winklevoss brothers, has filed a legal claim against Digital Currency Group (DCG) and its CEO and founder, Barry Silbert.
In a July 7 Twitter thread, Gemini’s Cameron Winklevoss accused DCG and its CEO, Barry Silbert, of fraud and deception. According to Winklevoss, DCG and Silbert were involved in a scheme to hide Genesis’ insolvency and deceive creditors. DCG is the parent company of Genesis. Silbert allegedly hid a “huge hole in Genesis’ balance sheet”
Cameron Winklevoss previously threatened to sue Silbert and DCG for repayment of a $900 million loan, after Genesis filed for bankruptcy. Gemini had a close connection to Genesis and directed investors to the platform through its Gemini Earn division.
Details of the Lawsuit
In the complaint, Winklevoss claimed that when Gemini decided to cancel its Earn program in October 2022, Silbert contacted Gemini to convince the exchange to continue with the program. “He did that knowing that Genesis was grossly insolvent,” Winklevoss said.
Genesis, the lender, powered the Gemini Exchange’s Earn program, offering depositors returns of up to 8%. Depositors entrusted their funds to Genesis, which then lent them to generate interest for Gemini clients.
Actually, Genesis had a huge financial hole caused by the collapse of Three Arrows Capital (3AC). Instead of being honest about the losses, Genesis and DCG devised a ruse, according to the complaint.
DCG allegedly pretended that it had absorbed Genesis’s losses and handed over a ten-year note with a low interest rate. Genesis told its creditors and depositors that its parent company, DCG, had “absorbed” 3AC’s losses.
“This was a carefully crafted lie,” Winklevoss tweeted on July 7: “Barry claimed that Genesis faced only a timing issue – a lie that hid the gaping hole on Genesis’s balance sheet. pic.twitter.com/4JW8aucCOB.”
DCG, Genesis “Conspired” against the Creditors
Gemini’s complaint alleges that the promissory note was simply an accounting trick. Designed to make it look like the struggling company has positive capital. In doing so, Genesis appeared solvent without DCG actually having to provide the cash.
Winklevoss alleged that Genesis and DCG conspired to make false financial reports, misrepresenting the value of the note. They allegedly then hid this from Gemini and other creditors.
In addition, he accused DCG executives, including Mark Murphy (then COO and current president), of being aware of the hoax and failing to correct the false reports.
The complaint provides multiple “falsified” balances that appear to show DCG and Genesis attempting to hide their financial difficulties. According to Winklevoss, this fraud involves the “direct involvement” and cooperation of Barry Silbert, DCG and Genesis.
DCG responded on Twitter within hours, calling the legal action “yet another publicity stunt… to deflect blame and responsibility.” The firm denied any suggestion of wrongdoing and confirmed that it expected Genesis’ Chapter 11 bankruptcy proceedings to be concluded soon.
In January, the SEC named Genesis and Gemini in a complaint accusing the pair of offering and selling unregistered securities through the Gemini’s Earn program. In May, Gemini tried to have the complaint dismissed, arguing that it was beyond the regulator’s purview.
By Marina Meza
