Gemini files lawsuit against Digital Currency Group and Barry Silbert over Genesis and Earn program
Gemini co-founder Cameron Winklevoss alleged Barry Silbert committed fraud by knowing Genesis was “massively insolvent” when attempting to continue the Earn program.
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United States-based cryptocurrency exchange Gemini has announced legal action against the conglomerate Digital Currency Group (DCG) and its CEO Barry Silbert, claiming “fraud against creditors”.
In a July 7 filing in a New York court, Gemini alleged DCG and Silbert engaged in a scheme involving lending “huge amounts of cryptocurrency and U.S. dollars” to Genesis. According to the filing, Gemini seeks to recover funds incurred as a result of “DCG’s and Silbert’s false, misleading, and incomplete representations and omissions to Gemini, and Defendants’ role in encouraging and facilitating Genesis’s fraud against Gemini”, adding the firm would also pursue legal avenues in Genesis’ bankruptcy case.
Genesis, a DCG subsidiary, had been the crypto lender responsible for operating an Earn program in partnership with Gemini which launched in 2021. The program claimed Gemini users could loan crypto to Genesis with the promise the firm would repay it with interest. However, the firm halted withdrawals in November 2022, citing “unprecedented market turmoil” and subsequently filed for Chapter 11 bankruptcy.
According to a July 7 Twitter thread from Gemini co-founder Cameron Winklevoss, Silbert knew Genesis was “massively insolvent” when attempting to continue the Earn program. The complaint included alleged false financial reporting from DCG and Silbert starting with the collapse of Three Arrows Capital in June 2022, which “blew a $1.2 billion hole in Genesis’s balance sheet”. Winklevoss has claimed that Genesis and DCG owe $900 million to Gemini’s clients.
“Barry, DCG, and Genesis all conspired to create false financial reports to hide the truth from Gemini and creditors,” claimed Winklevoss. “This fraud goes to the very top. Barry Silbert and other DCG executives were directly involved in these lies and they lied again and again to conceal the truth from Gemini and other creditors.”
Related: Gemini and Genesis’ legal troubles stand to shake up industry further
The fallout of the Earn program made both Genesis and Gemini targets of federal and state regulators. The U.S. Securities and Exchange Commission filed a suit against the two firms in January for allegedly offering unregistered securities, and New York’s Department of Financial Services was reportedly investigating Gemini over claims in its Earn program.
Cointelegraph reached out to DCG, but did not receive a response at the time of publication.
Magazine: Genesis files for bankruptcy, FTX explores a reboot, and Bitzlato news: Hodler’s Digest, Jan. 15-21