With investor confidence seemingly at an all-time low thanks to the recent slew of insolvencies, a new saga seems to be now unfolding in real time. This one involves crypto exchange Gemini’s Winklevoss twins and Barry Silbert, CEO of Digital Currency Group (DCG) — the parent firm behind crypto market maker and lender Genesis.
On Jan. 2, Cameron Winklevoss posted an open letter to Barry Silbert reminding him of the fact that it had been “47 days since Genesis halted withdrawals” while also providing a blunt, seemingly confrontational assessment of DCG’s existing business practices:
“For the past six weeks, we have done everything we can to engage with you in a good faith and collaborative manner in order to reach a consensual resolution for you to pay back the $900 million that you owe.”
The letter further indicated that the aforementioned sum was lent to Genesis as part of Gemini’s Earn program, an offering enabling customers to earn up to 7.4% annual percentage yield on cryptocurrencies. Cameron then issued another tweet requesting Silbert “publicly commit” to solving the problem by Jan. 8 — a request seemingly ignored by him, at least on Twitter.
Tensions have been mounting
Genesis’ ongoing woes stem from the fact that a significant portion of its funds (estimated to be worth $175 million) have been locked in an FTX trading account. Following the collapse of the once second-largest crypto exchange late last year, the company had to halt withdrawals on Nov. 16, even reportedly hiring the consultation services of investment bank Moelis & Company just a week later to get itself out of this pickle.
In a Dec. 7 letter, Derar Islim, the interim CEO of Genesis, told clients that “it will take additional weeks rather than days for us to arrive at a path forward.” In response, Winklevoss and company hired investment bank Houlihan Lokey to devise a framework with which they could “resolve its liquidity issues” keeping them from repaying members of Gemini’s Earn program.
Things then took an ugly turn on Dec. 27 when investors sued the twins over the blocked funds in the Earn program, accusing the two of fraud and several infractions of U.S. securities laws.
Furthermore, Silbert responded to Cameron’s constant Twitter nudges on Jan. 2, noting that Genesis had already taken action regarding Gemini’s proposal while also claiming innocence for DCG, stating unequivocally that the company had not been overdue to its payments to Genesis. In response, Cameron tweeted back:
There you go again. Stop trying to pretend that you and DCG are innocent bystanders and had nothing to do with creating this mess. It’s completely disingenuous.
So how does DCG owe Genesis $1.675 billion if it didn’t borrow the money? Oh right, that promissory note…
— Cameron Winklevoss (@cameron) January 2, 2023
Gemini terminates Earn program with Genesis
After weeks of turmoil, on Jan. 10, the Winklevoss twins sent out an email to users informing them that Gemini had terminated its flagship Earn program with Genesis two days prior. The move was the latest of many shots fired between the firm and the crypto lender, with the email stating:
“We are writing to let you know that Gemini — acting as an agent on your behalf — has terminated the Master Loan Agreement (MLA) between you and Genesis Global Capital, LLC (Genesis), effective as of January 8, 2023.”
The message then went on to add that effective immediately, Genesis was required to clear any outstanding assets that it had in association with the program, which until last month was offering users up to 8% interest on their crypto holdings.
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At present, customers can view their Earn balances under the “Pending” column as Gemini officials continue looking for a way to return customer money as soon as possible. “The return of your assets remains our highest priority and we continue to operate with the utmost urgency,” the email stated.
Lastly, in a claim filed in court on Jan. 8 in response to the class-action lawsuit put forward by Gemini Earn’s customers, Gemini says that much like its clients, it too has been the victim of Genesis and DCG Group’s conduct, claiming that the company’s executive brass had “misled defendants about Genesis, its financial condition, and its ability to act as a responsible borrower in the Gemini Earn program.”
Gemini has denied all of the accusations made against it by its clientele, saying it had all signed an agreement to “arbitrate claims relating to the Gemini Earn program” and that the various claims and causes of action initiated by the plaintiffs’ should not be litigated in any forum unless Genesis is also involved with the same.
SEC charges Genesis and Gemini
On Jan. 12, the U.S. Securities and Exchange Commission charged Gemini and Genesis with allegedly selling unregistered securities as part of the Earn offering. As per the…
cointelegraph.com