Winklevoss vs Silbert: Lawsuit Looms As Earn Program Users Caught In The Crossfire
After weeks of uncertainty, Gemini co-founder Cameron Winklevoss has expressed some satisfaction following the filing for bankruptcy protection under Chapter 11 by Genesis Trading, a subsidiary of Digital Currency Group.
According to Winklevoss, Genesis will be required to provide documentation on how the situation led to this stage. Notably, Genesis Trading and Gemini cryptocurrency exchange entered into a strategic relationship through the latter’s Earn program in 2021.
However, things took a turn for the worse after Genesis Trading incurred heavy losses from the collapse of FTX, Alameda, and Three Arrows Capital (3AC). As a result, Digital Currency Group made a strategic move to save Genesis Trading by absorbing its billion-dollar loss through a ten-year promissory note.
“The good news is that, by seeking the protection of the bankruptcy court, Genesis will be subject to judicial oversight and be required to provide discovery into the machinations that brought us to this point,” Winklevoss said.
In his defence, Silbert recently argued that DCG borrowed cash from Genesis Trading like any other firm, which will mature later this year.
“DCG currently owes Genesis Capital (i) $447.5M* in USD and (ii) 4,550 BTC (~$78M), which matures in May 2023,” Silbert noted in a letter to shareholders.
Digital Currency Group allegedly used the borrowed cash to buy back its stock from the secondary market and repurchase GBTC. This has led Winklevoss to believe that Silbert acted in bad faith by using Earn Program users, numbering over 340k customers, to hedge GBTC long positions. In response, Winklevoss has informed Earn Program users that Gemini will be filing a lawsuit against Silbert if he fails to make a fair offer.
5/ We have been preparing to take direct legal action against Barry, DCG, and others who share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices.— Cameron Winklevoss (@cameron) January 20, 2023
In addition, both Gemini and Genesis are currently facing a lawsuit filed by the United States Securities and Exchange Commission last week for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program.
“We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors,” said SEC Chair Gary Gensler.
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