The latest crypto news raises concerns about DCG entity Genesis, which is threatened to be sued by Gemini for its $630 million non-payment.
In addition, Gemini said it is working with Genesis, DCG and creditors to provide forbearance to DCG to avoid a default.
Below are all the details.
Gemini crypto exchange attacks Genesis: what’s going on?
As anticipated, Digital Currency Group (DCG) missed a $630 million payment due to Gemini last week.
At that point, Gemini CEO Cameron Winklevoss threatened to sue DCG CEO Barry Silbert and DCG for repayment of a $900 million loan.
This comes after Genesis, a DCG entity, filed for Chapter 11 bankruptcy amid allegations of commingled funds and ongoing litigation over loan repayments.
On the other hand, the US Securities and Exchange Commission (SEC) has accused both companies of selling unregistered securities through their Earn program.
Hence, Gemini and DCG are in discussions, and if no agreement is reached, Gemini and other parties are proposing a modified plan of reorganization with Genesis that does not require DCG’s approval, Gemini said in an update on its website:
“Consideration will be based in part on whether the parties believe DCG will engage in good faith negotiations about a consensual settlement.”
Meanwhile, Gemini is preparing to file a complaint demanding the return of more than $1.1 billion in digital assets from Genesis for its more than 200,000 Earn users.
Late last week, Genesis attorneys filed a request with the Bankruptcy Court for the Southern District of New York for an extension of their allotted time to file a Chapter 11 plan and solicit acceptances.
If the court approves it, they will have until 27 August to submit a plan and until 26 October for it to be accepted. According to a January court statement, Genesis owes more than $3.5 billion to its 50 major creditors including Gemini, Cumberland, Mirana, MoonAlpha Finance and VanEck’s New Finance Income Fund.
Winklevoss accuses DCG CEO Barry Silbert of “bad faith stalling tactics”
Recently, the co-founder of crypto exchange Gemini accused Digital Currency Group CEO Barry Silbert of “stalling tactics in bad faith” as their respective companies clash over a business disagreement resulting from the multibillion-dollar implosion of FTX late last year.
Specifically, Cameron Winklevoss criticized Silbert in an open letter posted on Twitter claiming that cryptocurrency broker Genesis Global Capital and its parent company, DCG, owe Gemini’s clients $900 million.
The letter alleges that Gemini has waited unnecessarily for six weeks for news on a repayment agreement. Silbert responded, tweeting that DCG handed Genesis and Gemini advisers a proposal on 29 December 2022, and had no response.
Winklevoss also accused DCG’s CEO of using $1.675 billion in money for purposes that helped other DCG initiatives instead of repaying creditors:
“You took this money to fuel greedy stock buybacks, illiquid venture investments, and grayscale kamikaze [net asset value] deals that inflated your Trust’s fee generation [assets under management], all at the expense of creditors and all for your personal gain.”
Silbert responded, tweeting that DCG “did not borrow $1.675 billion from Genesis.” He also stated that DCG has never missed an interest payment to Genesis and is current on all outstanding loans.
Gemini, Genesis and the problems following the FTX collapse
DCG has a $1.1 billion promissory note related to Genesis’ liabilities related to Three Arrows Capital‘s default. In November, Silbert wrote in a note to shareholders that DCG owed Genesis Global about $575 million due in May.
Gemini Trust Co. owned by Winklevoss and his twin brother Tyler, suspended repayments on an interest-generating product called Earn in mid-November, a week after rival cryptocurrency exchange FTX filed for bankruptcy.
The product offered investors the opportunity to earn up to 8% interest on their cryptocurrencies by lending those digital tokens to Genesis. Gemini’s redemption pause came on the heels of Genesis’ announcement that its derivatives business had about $175 million locked up on the now insolvent FTX platform.
Genesis stopped withdrawals and suspended new loan origination when FTX filed for bankruptcy. Since then, Genesis’ creditors have been working with restructuring lawyers to prevent insolvency.
Winklevoss’s letter comes as his company faces serious financial problems, including a lawsuit against the company’s Earn product for alleged fraud and securities law violations and a slew of angry Earn customers who have been unable to access their accounts.