Gemini, the cryptocurrency exchange helmed by the Winklevoss twins, is planning to sue Digital Currency Group (DCG) and its CEO Barry Silbert unless they offer a plan for repaying the $900 million loan Gemini made to the now-bankrupt Genesis Global.
“Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently,” Gemini co-founder and president Cameron Winklevoss tweeted soon after the news of Genesis’ bankruptcy broke.
Describing Genesis’ bankruptcy filing as “a crucial step” towards recovering the loan as the firm “will be subject to judicial oversight and be required to provide discovery into the machinations that brought us to this point,” Winklevoss also stressed that “the decision to put Genesis into bankruptcy does not insulate Barry, DCG, and any other wrongdoers from accountability.”
6/ Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently.
— Cameron Winklevoss (@cameron) January 20, 2023
Genesis, a subsidiary of DCG, was the industry’s first firm to launch an over-the-counter Bitcoin trading desk in 2013 but filed for bankruptcy protection late Thursday after suffering losses from the collapses of FTX and hedge fund Three Arrows Capital (3AC).
Last summer, Genesis was named the biggest creditor to 3AC, passing the Singapore-based firm $2.36 billion in an under-collateralized loan.
Gemini, Genesis and DCG
Gemini and Genesis had partnered on Gemini Earn, the beleaguered program that was sold to investors as a chance to earn as much as 7.4% interest on their cryptocurrency holdings.
By November 2022, the first signs of potential troubles began to show as Gemini warned the program’s customers of potential issues with withdrawals, with Genesis announcing the freeze of client withdrawals the same day.
Gemini Earn was eventually terminated on January 11, with the exchange saying the move was intended to force Genesis to pay back the $900 million it owes Gemini clients.
Last week, the U.S Securities and Exchange Commission (SEC) also announced charges against both Gemini and Genesis, saying the two firms "raised billions of dollars” worth of crypto from investors in Gemini Earn and alleging it was an unregistered offering that qualifies as the sale of securities to retail investors.
Gemini meanwhile went on to accuse both the crypto broker and its parent firm of committing fraud, urging DCG CEO to step down, saying there is “no path forward” as long as Silbert remains at the helm of the conglomerate and that “he has proven himself unfit” to run the business.
In response to those allegations, DCG said the statement was “another desperate and unconstructive publicity stunt” and that the company was “preserving all legal remedies in response to these malicious, fake, and defamatory attacks.”
Despite the public spat, DCG insisted that the firm would “continue to engage in productive dialogue with Genesis and its creditors with the goal of arriving at a solution that works for all parties.”