The co-founder and CEO of the Gemini crypto exchange, Cameron Winklevoss, has publicly accused Genesis, the crypto broker, along with its parent firm Digital Currency Group (DCG), of fraud.
He also demanded that Barry Silbert, the CEO of DCG, step down from his position. A number of allegations have been made about serious wrongdoings in the statement.
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Winklevoss also said that Silbert is not a competent CEO and as long as he remains in this position, they cannot move forward.
Winklevoss also asserted that DCG would be able to work with Gemini under new management and this would help them ensure a win-win situation.
DCG not only owns Genesis but is also the parent company of crypto app Luna, the institutional crypto firm Grayscale Capital, and CoinDesk, the media company.
According to the statement, DCG and Genesis, including the CEO and other personnel, had made misrepresentations and false statements to Gemini investors and also the public about the financial health of Genesis.
Genesis had been a partner of the Earn product of the Gemini Exchange, which had given users returns of 8% on their cryptocurrencies.
However, the platform stopped its withdrawals in November 2022, when the same announcement was made by Genesis.
It was further asserted by Winklevoss that DCG had suffered from huge losses because of its exposure to Three Arrows Capital (3AC), the crypto hedge fund that filed for bankruptcy last year.
The Gemini CEO said that the company had dug itself into a hole and had wanted time to get out of it. He accused Genesis of lending funds to the hedge fund recklessly.
He said that the money had been used by 3AC for trading, as it had swapped Bitcoin and gotten shares in GBTC (Grayscale Bitcoin Trust).
According to Winklevoss, Silbert had not stopped these transactions because it would have meant that GBTC shares would not be sold and their price would have taken a hit.
Furthermore, Winklevoss said that rather than reporting the said transactions as ‘risky derivatives trades’, DCG had misrepresented them as collateralized loans.
Therefore, the balance sheet of the company appeared healthier than it really was. He also said that claims of DCG about injecting $1.2 billion into Genesis back in July had also been false.
He stated that the company had not given the crypto broker a penny and that the 10-year promissory note that DCG had issued was just a gimmick because it did not improve the solvency or liquidity of Genesis.
The founder accused DCG of committing accounting fraud because the promissory note had been categorized as a current asset, which applies to assets that can be exchanged for their value within a year.
Winklevoss said that DCG and Genesis had misunderstood the definition of current assets, which means they had committed fraud.
The reason for the conflict is a sum of $900 million that Genesis owes to Gemini for its Earn product and the crypto exchange has been demanding the payment.