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Gemini Pulled $282 Million from Genesis Before Its Bankruptcy — Did Winklevoss Twins Know About Imminent Crisis?

Last Updated September 29, 2023 9:41 AM
Teuta Franjkovic
Last Updated September 29, 2023 9:41 AM

Key Takeaways

  • Exchanging cryptocurrencies Prior to Genesis’ bankruptcy, Gemini reportedly withdrew $282M in crypto.
  • Allegedly, the cryptocurrency exchange utilized the money to establish a reserve for its Gemini Earn clients.
  • According to reports, none of the withdrawn money got to Gemini’s millionaire founders, the Winklevoss twins.

Only months before the crypto company’s collapse left the twins’ customers unable to access their cash, Cameron and Tyler Winklevoss covertly withdrew  more than $280 million held by the bank of their crypto company.

The Winklevoss twins, best known for their bitter legal dispute with billionaire Barry Silbert, whose company Digital Currency Group owns the now-bankrupt cryptocurrency bank Genesis, have recently been involved in another nasty legal dispute.

The Winklevoss twins are also famous for their bitter legal dispute with former Harvard classmate Mark Zuckerberg over control of Facebook.

Genesis did not immediately respond to a request for comment.

Gemini Customers $900M Issue

The twins, co-founders of Gemini, a digital currency exchange that experienced growth in the past but faced setbacks this year, including layoffs and a decrease in trading activity.

In November, 2022, deposits made by Gemini customers totaling about $900 million were blocked  after Genesis was compelled to halt withdrawals after being made aware of Sam Bankman-Fried’s FTX empire’s collapse.

The dispute between the two parties centers around the Gemini Earn program, which the Winklevoss twins and Silbert promoted as a way for users to earn 8% annual interest on their digital currency deposits.

An examination of internal emails and documents  reveals that Gemini withdrew funds from Genesis, the lender for the Earn program, on August 9 of the previous year.

Did Winklevoss Twins Somehow Knew what Would Happen?

Just months before the collapse of the crypto company, which left customers unable to access their funds, Cameron and Tyler Winklevoss quietly withdrew over $280 million from their crypto company’s bank.

It’s unclear whether this money came from the Winklevoss twins’ personal crypto holdings or assets owned by Gemini as a company. Importantly, it did not include any cash from Gemini customers.

One document, a balance statement, revealed that between August 5 and August 10 of the previous year, Gemini deposits in Genesis had decreased by nearly $176 million. While a $282 million withdrawal occurred during that five-day period, client deposits and cryptocurrency price fluctuations offset it, according to sources.

On August 8, 2022, just one day before the withdrawal, a second document—an email—explained the Winklevoss twins’ request and provided a detailed breakdown of the $282 million. It included 3,120 Bitcoins, 18,060 Ether, and over 142 million units of Gemini’s “stablecoin,” tied to the US dollar.

The total also encompassed more than 49.6 million units of Dogecoin, the whimsical cryptocurrency favored by Tesla CEO Elon Musk, which had a value of around 6 cents each at the time.

An insider claimed that only a few months before Genesis restricted customer withdrawals, the Winklevoss twins withdrew their own money, whether it was corporate funds or personal funds. The source suggested that they were comfortable for Gemini Earn customers but not for themselves.

Unkown Motives

Although the twins’ motives for withdrawing the money are unknown, their decision to do so months before Genesis suspended customer withdrawals raises concerns about what they knew in August 2022 and may cast doubt on their claims in a pending lawsuit that they were unaware of the severity of the lender’s financial difficulties.

The Winklevoss twins filed a lawsuit against Silbert and the Digital Currency Group in July.

Silbert provided a “false, misleading, and incomplete representation” of Genesis’s financial situation, leaving them in the dark, according to the complaint.

The lender lost $1.1 billion on a loan to the failed cryptocurrency hedge fund Three Arrows Capital, according to the twins, who claimed DCG promised them that it had backed-topped Genesis amid a liquidity crisis that had surfaced earlier in 2022.

Actually, the lawsuit contends, Silbert’s company had only offered a promissory note—basically a corporate IOU—instead of a cash infusion. The brothers said that they tried to leave the “Earn” partnership in the middle of October 2022, but Silbert was able to persuade them during a face-to-face meeting to stay.

“In direct reliance on Silbert’s misrepresentations, Gemini elected to delay the termination of the Gemini Earn Program—and not to explore the possibility of pursuing more rapid end or other relief, as Gemini would have done if Silbert had stated the truth,” the lawsuit alleged.

Assertions of misconduct in Gemini’s lawsuit have been deemed “baseless, defamatory, and completely false” by DCG, which has filed a move to dismiss the case last month.

Legality of Winklevoss Twins’ Withdrawal Is a Matter of Debate

John Coffee, a securities law expert and professor at Columbia Law School, suggests  that the legality of the Winklevoss twins’ withdrawal is in question because several court cases are still resolving the status of bitcoin goods as securities.

Coffee said that the removal is “dubious” for any company representing itself as an authorised operator.

According to a report, the Winklevoss twins are eliminating 10%  of Gemini’s personnel. Coffee added that a credible broker or credible financial entrepreneur would have to disclose that it is liquidating its own investments as it is selling large quantities, at the very least, out of respect for customers.

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