- The Winklevoss twins accused Barry Silbert, DCG, and crypto brokerage Genesis of fraud.
- In a letter to DCG’s board, Gemini cofounder Cameron Winklevoss called for Silbert to step down as CEO.
- A Genesis spokesperson told Insider that Winklevoss is making “misleading public statements despite productive private dialogue” between the parties involved.
Gemini cofounder Cameron Winklevoss is calling for Digital Currency Group (DCG) founder Barry Silbert to step down as the crypto conglomerate’s chief executive officer, and says the executive and DCG have defrauded users of the Winklevoss’s Gemini crypto exchange.
In an open letter to DCG’s board, Winklevoss called Silbert “unfit” to lead the company after failing to resolve liquidity issues involving the parent company’s crypto brokerage Genesis.
Genesis’ lending arm halted loan originations and redemptions due to FTX contagion in November. As a result, the Winklevoss’s crypto exchange Gemini had to pause withdrawals on its interest-bearing product, leaving $900 million of customer money frozen on its platform. Gemini partnered with Genesis for this offering.
“He has proven himself unfit to run DCG and unwilling and unable to find a resolution with creditors that is both fair and reasonable,” Winklevoss wrote. “As a result, Gemini, acting on behalf of 340,000 Earn users, requests that the Board remove Barry Silbert as CEO, effective immediately, and install a new CEO, who will right the wrongs that occurred under Barry’s watch.”
—Cameron Winklevoss (@cameron) January 10, 2023
Winklevoss said that Genesis lenders, including Earn users, have been “seriously harmed and deserve a resolution for the recovery of their assets.”
Silbert, Genesis, and the parent company defrauded Gemini and their users, Winklevoss says. Issues with DCG allegedly stem back to Genesis’ exposure to now-defunct crypto hedge fund Three Arrows Capital, which the brokerage lent $2.36 billion of assets to, according to Winklevoss.
Three Arrows filed for bankruptcy in July following a series of risky and overleveraged bets.
“After collateral was liquidated, Genesis indicated that it was left with a loss of at least $1.2 billion. At this point, Barry Silbert had two legitimate options: restructure the Genesis loan book (inside or outside of bankruptcy court) or fill the $1.2 billion hole. He did neither.” the letter reads.
He added: “Beginning in early July 2022, Barry, DCG, and Genesis embarked on a carefully crafted campaign of lies to make Gemini, Earn users, and other lenders believe that DCG had injected $1.2 billion of actual support into Genesis.”
DCG tried to cover up Genesis’ loss for months, Winklevoss says, accusing the parties involved of accounting fraud.
“While we are disappointed Gemini has chosen to make misleading public statements despite productive private dialogue between the parties, we remain focused on finding a solution for our borrowing and lending intermediation business and reaching the best outcome for all affected Genesis lending and Gemini Earn clients,” a Genesis spokesperson told Insider.
The spokesperson added: “We continue working with our advisors, in collaboration with DCG and advisors appointed by various client groups, to evaluate options to preserve client assets and move the business forward.”
Winklevoss slammed Silbert for “bad faith stalling tactics” in another open letter last week, giving Silbert and DCG until January 8 to find a solution. The Gemini exec claimed Silbert borrowed $1.67 billion from his own Genesis subsidiary for venture investments, share buybacks, and “kamikaze Grayscale NAV trades” that inflated fee-generating assets under management. Silbert refuted the claims in a response to Winklevoss on Twitter.
Elsewhere, the US Department of Justice and the US Securities and Exchange Commission are investigating DCG, Bloomberg reported on Friday, citing unnamed sources.