Winklevoss twins led crypto exchange Gemini has filed a lawsuit against the conglomerate Digital Currency Group (DCG) and its CEO Barry Silbert for allegedly defrauding creditors.
As per the lawsuit, Gemini claims the DCG CEO committed fraud as Genesis attempted to continue the Earn Program despite being “massively insolvent.”
US-based crypto exchange Gemini is the largest creditor of bankrupt crypto lending firm Genesis, the subsidiary of DCG.
The lawsuit comes just three days after Cameron Winklevoss put forward a final proposal for DCG to return over over $1 billion of its customers’ funds.
Gemini Claims Barry Silbert Knew Genesis Was Insolvent
As per the filing, Gemini notified Genesis of terminating its Earn program in October 2022, but Barry personally convinced Gemini to continue the program.
The lawsuit claims the DCG CEO did this knowing Genesis was massively insolvent.
Winklevoss owned exchange is now seeking to recover funds incurred as a result of Silbert’s false, misleading, and incomplete representations to Gemini and DCG’s role “in encouraging and facilitating Genesis’s fraud against Gemini.”
The lawsuit further alleges that when Three Arrows Capital (3AC) collapsed in June 2022, it blew a $1.2 billion hole in Genesis’s balance sheet. But Silbert did not come clean and lied that DCG had stepped in to absorb the losses.
“Barry, DCG, and Genesis all conspired to create false financial reports to hide the truth from Gemini and creditors,” Cameron Winklevoss tweeted sharing the lawsuit in a Twitter thread.
Instead of covering losses of its subsidiary like it informed Gemini, DCG wrote Genesis a 10 year promissory note with 1% interest rate – worth just a fraction of its $1.1 billion face amount, Gemini co-founder revealed in the lawsuit.
The lawsuit does not come as a surprise as the US-based exchange had continuously warned DCG of taking legal action if it did not move to resolve the issue.
US SEC Is Suing Gemini For Its Earn Program
The U.S. Securities and Exchange Commission (SEC) filed a lawsuit in January against Gemini and Genesis for allegedly offering unregistered securities through the exchanges Earn program.
New York State’s Department of Financial Services was also investigating Gemini over its claims about the assets in its Earn lending program.
Apparently, many Gemini users believed that assets in their Earn accounts were protected by the Federal Deposit Insurance Corporation.
As reported earlier in May, Gemini and Genesis requested the court to dismiss the lawsuit brought on by the US SEC.
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