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Winklevoss vs. Silbert: DCG Calls Gemini Lawsuit Publicity Stunt as Creditors Left Waiting

Published July 11, 2023 9:02 AM
Omar Elorfaly
Published July 11, 2023 9:02 AM

Key Takeaways

  • Crypto exchange Gemini has sued Digital Currency Group over funds tied up in bankrupt Genesis.
  • Gemini founder & CEO Cameron Winklevoss alleged Barry Silbert’s DCG was involved in fraudulent behavior.
  • DCG has labeled the lawsuit as a “publicity stunt.”

A war of words has continued online after cryptocurrency exchange Gemini filed a lawsuit against Digital Currency Group (DCG) over funds locked up in its bankrupt subsidiary lending firm Genesis.

Gemini, which was the largest creditor of Genesis before it filed for Chapter 11 bankruptcy in January 2023, alleges that DCG and its CEO Barry Silbert engaged in fraud after misleading investors about the financial health of Genesis.

Gemini is looking to claw back over $1.2 billion that was tied up in Genesis, with the bankrupt firm operating the former’s Earn program from 2021. The agreement allowed Gemini users to loan out cryptocurrency holdings to Genesis to generate interest.

Genesis announced a halt on withdrawals in November 2022 due to “unprecedented” market conditions before later filing for bankruptcy, tying up some $3.3 billion in the defunct lending firm. 

Trading Punches on Twitter

The ongoing dispute between Gemini and DCG has played out in the public sphere of social media, with Gemini founder and CEO Cameron Winklevoss grabbing headlines after penning a no-holds-barred, open letter to Silbert. 

The letter outlines a litany of allegations against Silbert and DCG, accusing both of fraudulent behavior while slamming Silbert for fostering “a culture of lies and deceit”. It also raised concerns over a $630 million loan DCG made to Genesis which it failed to repay. 

Following Gemini’s lawsuit filing on July 7, DCG released a statement on Twitter that disparaged the legal action. DCG labeled the lawsuit as a “publicity stunt” carried out by Winklevoss to “deflect blame and responsibility” from Gemini and its Earn users that have been affected by the bankruptcy.

DCG also claims that neither Cameron nor his twin brother Cameron Winklevoss had been involved in the recent meeting between DCG and representatives of the official unsecured creditors committee.

Who’s Left Out of Pocket?

While Gemini remains the largest creditor looking to recoup lost funds after Genesis’ bankruptcy filing, there’s a long line of firms that have been left out of pocket.

According to the Genesis bankruptcy filing  from January 2023, there are an estimated 100,000 creditors and anywhere between $1 to $10 billion in liabilities and assets on its balance sheet.

Gemini Trust Company was owed $766 million, while crypto fund Mirana and MoonAlpha Finance both had around $150 million locked up in Genesis. VanEck’s New Finance Income Fund had some $53 million in exposure while trading company Cumberland DRW is seeking $18.7 million.

According to a report from CoinDesk, a number of creditors were also redacted from the filing. One unnamed creditor is owed a staggering $462 million, while another anonymous creditor had $230 million locked up in the bankrupt lending firm.

The filing also noted that Genesis Global Capital expected to have enough capital left after restructuring to payout unsecured creditors, typically unpaid in more serious bankruptcy cases. 

DCG was due to pay $526 million in May 2023 to Genesis, but this payment was delayed due to creditor demands. 

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