In recent hours, Cameron Winklevoss, co-founder of crypto exchange Gemini, has openly lashed out against Barry Silbert, CEO of DGC.
Indeed, Winklevoss wrote an open letter to the board of Digital Currency Group (DCG) claiming that CEO Barry Silbert was unfit to lead the company.
Specifically, Winklevoss argues that no path will be viable as long as Silbert remains CEO of DCG. Moreover, according to the Gemini co-founder’s letter, recursive exchanges between the Grayscale Bitcoin Trust and hedge fund Three Arrows Capital would have inflated assets.
Gemini’s Winklevoss lashes out against DCG: Genesis owes him $900 million
As anticipated, in a letter dated 10 January, Winklevoss alleged that Silbert and Genesis Global Capital, a subsidiary of DCG, had scammed more than 340,000 users who were part of Gemini’s Earn program.
The letter followed a Twitter appeal from 2 January aimed directly at Silbert, in which the Gemini co-founder claimed that Genesis owed the exchange $900 million, accusing the CEO of hiding behind lawyers, investment bankers and lawsuits.
Gemini later informed its users that it had terminated its Earn program as of 8 January.
According to Winklevoss, Genesis loaned more than $2.3 billion to Three Arrows Capital, a move that ultimately left the cryptocurrency company with a $1.2 billion loss once the hedge fund failed in June 2022.
The co-founder of Gemini also claimed that Silbert, DCG and Genesis orchestrated “a carefully crafted campaign of lies” starting in July 2022 in an attempt to prove that DCG had injected funds into Genesis by including a 10-year promissory note as part of its assets.
Winklevoss said that Genesis CEO Michael Moro was complicit in this duplicity by making false and misleading statements on social media regarding DCG providing capital to Genesis.
He also stated that some DCG staff members had been working behind the scenes to cover up the lack of adequate capitalization at Genesis. Winklevoss’s letter was posted on the Gemini co-founder’s official Twitter profile, which reads:
Earn Update: An Open Letter to the Board of @DCGco pic.twitter.com/eakuFjDZR2
— Cameron Winklevoss (@cameron) January 10, 2023
Whereas, the letter reads:
“These misrepresentations were a sleight of hand designed to make it appear that Genesis was creditworthy and able to meet its obligations to lenders, without DCG actually committing to the financial backing necessary to make this true. DCG wanted to have her cake and eat it too.”
Silbert’s response to Gemini co-founder Winklevoss’ letter
According to sources, internal DCG voices called Winklevoss’s letter a “desperate and unconstructive publicity stunt,” stating that Winklevoss and Gemini were solely responsible for operating Gemini Earn and marketing the program to its customers.
The company suggested that it might take legal action if necessary.
In particular, Silbert addressed some of Winklevoss’ allegations in a letter dated 10 January to shareholders, in which he said that Genesis had a business and lending relationship with both Three Arrows Capital and Alameda Research.
He also added that DCG did not receive any cash, cryptocurrency or other form of payment for a $1.1 billion promissory note for Genesis’ liabilities.
In addition, the DGC CEO also clarified his position on the monetary issue, stating:
“DCG currently owes Genesis Capital $447.5 million in USD and 4,550 BTC ($78 million), due May 2023. DCG borrowed $500 million in USD between January and May 2022 at interest rates of 10%-12%.”
In contrast to his letter from 2 January, Winklevoss directly called the DCG board to remove Silbert in an effort to provide a solution for Earn’s users. In response to that letter, Silbert stated that DCG has not borrowed $1.675 billion from Genesis and has never missed an interest payment to Genesis, being current on all outstanding loans.
Regardless, Winklevoss stands by his position. In fact, we can read his harsh attack on Silbert:
“There is no way forward as long as Barry Silbert remains CEO of DCG. He has proven himself unfit to manage DCG and unwilling and unable to find a settlement with creditors that is fair and reasonable. As a result, Gemini, acting on behalf of 340,000 Earn users, is asking the Board to remove Barry Silbert as CEO.”
Gemini’s blocked funds: the subpoena for the Earn program
Although the above parties are both facing significant financial difficulties, it was Gemini that was sued last week over the money locked up in its Earn program.
Thus, as early as 2 January, 47 days after Genesis stopped taking withdrawals, Winklevoss had already written to Silbert making a blunt assessment regarding DCG’s business practices.
As anticipated, Winklevoss accuses Genesis because, according to the co-founder, he owes Gemini $900 million for funds Gemini loaned him as part of the Gemini Earn program.
Winklevoss, in fact, had written:
“Over the past six weeks, we have done everything possible to engage with you in good faith and collaboratively to reach an amicable resolution to repay you the $900 million you owe. Every time we ask you for a tangible commitment you hide behind lawyers, investment bankers and lawsuits.”
Specifically, Gemini was sued by investors on 27 December. The lawsuit alleges that Gemini committed fraud and violations of securities laws because the Earn program was not registered and investors were unable to fully assess its risks. In fact, Earn stopped paying investors in November.