Gemini Files Lawsuit Alleging Fraud by DCG and CEO Silbert


Gemini Files Lawsuit Alleging Fraud by DCG and CEO Silbert

Gemini, a cryptocurrency exchange based in the United States, has initiated legal proceedings against Digital Currency Group (DCG), a conglomerate, and its CEO, Barry Silbert, alleging "fraud against creditors." The legal action was announced through a filing on July 7 in a New York court. Gemini claims that DCG and Silbert were involved in a scheme that included lending substantial amounts of cryptocurrency and U.S. dollars to Genesis, a subsidiary of DCG. Gemini aims to recover funds lost due to DCG and Silbert's alleged false, misleading, and incomplete representations and omissions, as well as their role in enabling Genesis' fraudulent activities. The company also plans to explore legal avenues in the bankruptcy case of Genesis.

Genesis, responsible for operating an Earn program in partnership with Gemini since its launch in 2021, was a crypto lender. The program allowed Gemini users to loan crypto to Genesis, with the promise of repayment with interest. However, Genesis suspended withdrawals in November 2022, citing "unprecedented market turmoil," and subsequently filed for Chapter 11 bankruptcy.

According to a Twitter thread on July 7 by Cameron Winklevoss, co-founder of Gemini, Silbert was aware of Genesis' significant insolvency when attempting to continue the Earn program. The complaint also highlights alleged false financial reporting by DCG and Silbert, which began after the collapse of Three Arrows Capital in June 2022, resulting in a $1.2 billion deficit in Genesis' balance sheet. Winklevoss claims that Genesis and DCG owe $900 million to Gemini's clients.

Winklevoss alleges that Silbert, DCG, and Genesis conspired to create false financial reports to conceal the truth from Gemini and its creditors. He further asserts that Silbert and other DCG executives were directly involved in these deceptive actions, repeatedly lying to hide the truth.

Winklevoss had previously threatened legal action against DCG and Silbert due to delays in resolving the issues between Gemini and Genesis. In a recent open letter to the CEO, he proposed a "best and final offer" of $1.47 billion by 2028. DCG responded on July 7 via Twitter, dismissing the lawsuit as a "publicity stunt" by Winklevoss and declaring any claims of wrongdoing as baseless, defamatory, and completely false.

The fallout from the Earn program resulted in both Genesis and Gemini coming under scrutiny from federal and state regulators. In January, the U.S. Securities and Exchange Commission filed a lawsuit against both firms for allegedly offering unregistered securities. Additionally, the New York Department of Financial Services reportedly initiated an investigation into Gemini regarding claims related to its Earn program.

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