DCG brands Gemini’s lawsuit a ‘publicity stunt’

Gemini followed through on its self-imposed deadline to sue Digital Currency Group and its CEO Barry Silbert on Friday, marking the largest escalation yet of the company’s attempts to recoup substantial funds it says it’s owed. 

The lawsuit, filed in New York state court on Friday, said its claims are “about fraud.” The legal action alleges that DCG and Silbert “engaged in a fraudulent scheme to induce a variety of depositors, including Gemini users,” in order to “lend huge amounts of cryptocurrency and U.S. Dollars to DCG’s subsidiary Genesis Global Capital.”

Gemini claims that both DCG and Genesis “falsely represented that DCG had absorbed the losses on the 3AC loans at the parent level” and claimed it was “business as usual.” The company had floated a Thursday deadline to reach a settlement before resorting to legal action. 

Loading Tweet..

Genesis, the lending conglomerate arm of DCG, was at the time, however, insolvent, the suit said. Silbert and Gemini have been embroiled in a prolonged disagreement regarding the amounts in question. 

Following the collapse of FTX, Gemini claimed Genesis “refused to honor its obligations and suspended all withdrawals of borrowed cryptocurrency.” A $1.1 billion infusion from DCG, as it turns out, was said to be only a “promissory note that was not due until 2023.”

Gemini claims it has attempted to work toward solutions to return assets to the Gemini Earn lenders, but it has yet to find common ground with DCG or Silbert “despite paying public lip service to that goal.”

Responding to the lawsuit, DCG tweeted on Friday that the lawsuit “is yet another publicity stunt from Cameron Winklevoss to deflect blame and responsibility from himself and Gemini…any suggestion of wrongdoing by DCG or any of its employees is baseless, defamatory, and completely false.”

DCG claimed that “Gemini’s leadership was MIA” or only issued “press statements” and neither Cameron or Tyler Winklevoss “have been involved in any of the recent in-person meetings.”

Loading Tweet..

The fact that Gemini is not a creditor in Genesis’ bankruptcy proceedings led the company’s attorneys to claim their own situation is complex — one stated rationale behind the lawsuit.

The lawsuit alleges two counts: fraud and aiding and abetting fraud. 

DCG and Silbert “aided and abetted Genesis in making fraudulent misrepresentations to Gemini with respect to Genesis’s financial condition and the support it received from DCG,” the suit said.

The allegations stretch back for some time, with the suit claiming Silbert “went to great lengths to keep creditors in the dark.”

Gemini, in 2022, said it sent an email to Genesis giving a 30-day notice of the termination of the Earn Program, a yield-bearing crypto product suite. 

In October, Silbert proceeded to push for a face-to-face meeting with Tyler and Cameron Winklevoss, the co-founders of Gemini. The suit alleges that when they sat down with Silbert, he “made numerous representations designed to induce Gemini not to discontinue the Earn program,” while failing to disclose that Genesis was insolvent.

Updated July 7, 2023 at 12:20 pm ET: Added context throughout, including a statement from DCG.

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
• Empire: Start your day with top crypto insights from David Canellis and Katherine Ross.
• Forward Guidance: Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin.
• 0xResearch: Get alpha directly in your inbox — market highlights, charts, degen trade ideas, governance updates, and more.
• Lightspeed: All things Solana, in your inbox, every day from Jack Kubinec and Jeff Albus.
• The Drop: The newsletter for crypto collectors and traders, covering games, tokens, apps, memes and more.