Gemini Sues DCG, Founder Barry Silbert over Genesis’ Debit in Earn Program


Cryptocurrency
exchange Gemini has dragged bankrupt digital lender Genesis’ parent company,
Digital Currency Group (DCG), and its CEO, Barry Silbert, to court. In a lawsuit filed today (Friday) before a trial court in New York, the exchange
accused both parties of “encouraging and facilitating” Genesis’ fraud against the firm.

According
to the New York-based exchange, thousands of its users signed up for Gemini Earn Program under which
they lent out their digital assets to Genesis in order to earn profit. However,
Gemini in cooperation with its parent company lied about its
“purportedly robust risk-management practices,” Gemini alleged in its court filing.

Instead,
Genesis “was recklessly lending huge amounts to a counterparty [DCG and
Silbert] knew was using these huge amounts to fuel a risky arbitrage trading
strategy,” Gemini contended. In November, following FTX’s collapse and subsequent bankruptcy
filing in New York, Genesis paused withdrawal on its platform, citing
“unprecedented market turmoil.” The lender even sought a $1 billion
emergency loan from
investors.

In the court filing, Gemini said Genesis as a result of this exposure
failed to
honour its debt to the Earn Program lenders. Cameron Winklevoss, the
Co-Founder of Gemini, has previously claimed that DCG was owing its customers over $900 million. On Tuesday, the CEO even
proposed a ‘best and final offer’ of $1.47 billion in phased repayments to Gemini, to be
completed by 2028.

DCG Lied about Absorbing Genesis’ 3AC Losses: Gemini

In its complaint,
Gemini said it wants to recover damages and losses it had racked up as a direct
result of Silbert’s “false,
misleading, and incomplete representations and omissions” to its firm.
Specifically, Gemini contended that the DGC Founder ‘falsely represented’ that the
parent company had absorbed, through a $1.1 billion infusion, losses totalling
$1.2 billion that Genesis incurred due to its exposure to the now-bankrupt crypto
lender Three
Arrow Capital (3AC). Ultimately, Silbert allegedly revealed that the
supposed infusion
was a promissory note not activatable until 2032.

“Silbert knew that Genesis was massively insolvent, but did not disclose that fact to
Gemini,” the cryptocurrency exchange said. “Indeed, Silbert went far beyond that fraudulent omission, representing to Gemini that,
although the Genesis loan portfolio was ‘complex,’ it could be successfully unwound within a
reasonable period of time.”

Gemini added: “That is, Silbert told Gemini that Genesis faced only a short-term
mismatch in the timing of its loan portfolio, concealing the reality that Genesis had a massive hole
in its balance sheet and would be unable to honour its obligations to Gemini and others, because
DCG had not actually assumed the 3AC losses.”

Since
Genesis filed for bankruptcy protection in January 2023, Gemini
has been working with the cryptocurrency lender “on a consensual restructuring”
that would maximize recovery for Gemini Earn lender “without prolonged delay,” Gemini noted. The exchange added that
it was separately pursuing its case against Genesis in the digital lender’s bankruptcy case.

Gemini and DCG Trade Blames

Sharing snippets of the court filing on Twitter on Friday, Winklevoss said the “fraud” committed against Gemini “goes to the very top.”

“DCG — and Barry personally – are direct participants in the fraud that has damaged Gemini and hundreds of thousands of Earn users,” Winklevoss wrote. “This complaint is an important step in holding them accountable for what they have done.”

In a statement released on Twitter on Friday, DCG called Gemini’s lawsuit “yet another publicity stunt from Cameron Winklevoss to deflect blame and responsibility from himself and Gemini, which operated the Gemini Earn program.”

“Any suggestion of wrongdoing by DCG or any of its employees is baseless, defamatory, and completely false,” DCG added.

Meanwhile, Gemini and Genesis were both sued in January by the US Securities and Exchange Commission which claimed that the feuding companies offered unregistered securities to the public through their crypto lending products. In late 2022, a certain group of investors also hit Gemini with a class-action lawsuit over the Earn Program which had promised up to 7.4 percent yield to customers for lending out their digital assets.

Cryptocurrency
exchange Gemini has dragged bankrupt digital lender Genesis’ parent company,
Digital Currency Group (DCG), and its CEO, Barry Silbert, to court. In a lawsuit filed today (Friday) before a trial court in New York, the exchange
accused both parties of “encouraging and facilitating” Genesis’ fraud against the firm.

According
to the New York-based exchange, thousands of its users signed up for Gemini Earn Program under which
they lent out their digital assets to Genesis in order to earn profit. However,
Gemini in cooperation with its parent company lied about its
“purportedly robust risk-management practices,” Gemini alleged in its court filing.

Instead,
Genesis “was recklessly lending huge amounts to a counterparty [DCG and
Silbert] knew was using these huge amounts to fuel a risky arbitrage trading
strategy,” Gemini contended. In November, following FTX’s collapse and subsequent bankruptcy
filing in New York, Genesis paused withdrawal on its platform, citing
“unprecedented market turmoil.” The lender even sought a $1 billion
emergency loan from
investors.

In the court filing, Gemini said Genesis as a result of this exposure
failed to
honour its debt to the Earn Program lenders. Cameron Winklevoss, the
Co-Founder of Gemini, has previously claimed that DCG was owing its customers over $900 million. On Tuesday, the CEO even
proposed a ‘best and final offer’ of $1.47 billion in phased repayments to Gemini, to be
completed by 2028.

DCG Lied about Absorbing Genesis’ 3AC Losses: Gemini

In its complaint,
Gemini said it wants to recover damages and losses it had racked up as a direct
result of Silbert’s “false,
misleading, and incomplete representations and omissions” to its firm.
Specifically, Gemini contended that the DGC Founder ‘falsely represented’ that the
parent company had absorbed, through a $1.1 billion infusion, losses totalling
$1.2 billion that Genesis incurred due to its exposure to the now-bankrupt crypto
lender Three
Arrow Capital (3AC). Ultimately, Silbert allegedly revealed that the
supposed infusion
was a promissory note not activatable until 2032.

“Silbert knew that Genesis was massively insolvent, but did not disclose that fact to
Gemini,” the cryptocurrency exchange said. “Indeed, Silbert went far beyond that fraudulent omission, representing to Gemini that,
although the Genesis loan portfolio was ‘complex,’ it could be successfully unwound within a
reasonable period of time.”

Gemini added: “That is, Silbert told Gemini that Genesis faced only a short-term
mismatch in the timing of its loan portfolio, concealing the reality that Genesis had a massive hole
in its balance sheet and would be unable to honour its obligations to Gemini and others, because
DCG had not actually assumed the 3AC losses.”

Since
Genesis filed for bankruptcy protection in January 2023, Gemini
has been working with the cryptocurrency lender “on a consensual restructuring”
that would maximize recovery for Gemini Earn lender “without prolonged delay,” Gemini noted. The exchange added that
it was separately pursuing its case against Genesis in the digital lender’s bankruptcy case.

Gemini and DCG Trade Blames

Sharing snippets of the court filing on Twitter on Friday, Winklevoss said the “fraud” committed against Gemini “goes to the very top.”

“DCG — and Barry personally – are direct participants in the fraud that has damaged Gemini and hundreds of thousands of Earn users,” Winklevoss wrote. “This complaint is an important step in holding them accountable for what they have done.”

In a statement released on Twitter on Friday, DCG called Gemini’s lawsuit “yet another publicity stunt from Cameron Winklevoss to deflect blame and responsibility from himself and Gemini, which operated the Gemini Earn program.”

“Any suggestion of wrongdoing by DCG or any of its employees is baseless, defamatory, and completely false,” DCG added.

Meanwhile, Gemini and Genesis were both sued in January by the US Securities and Exchange Commission which claimed that the feuding companies offered unregistered securities to the public through their crypto lending products. In late 2022, a certain group of investors also hit Gemini with a class-action lawsuit over the Earn Program which had promised up to 7.4 percent yield to customers for lending out their digital assets.





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