Crypto exchange Gemini is suing the parent company of bankrupt crypto brokerage Genesis over its Gemini Earn program, alleging that the lender’s top executives are misleading creditors.
US-based exchange Digital Currency Group (DCG) is suing, according to a new report from Reuters.
Additionally, in a long thread, Gemini co-founder Cameron Winklevoss say that the crypto exchange has filed a lawsuit against DCG and its CEO, Barry Silbert, for allegedly personally masterminding a fraud scheme against creditors.
According to Winklevoss, after Gemini decided to end the Earn program, Silbert contacted the company urging them to continue, knowing that Genesis was “massively insolvent.”
The Earn program was a partnership between the two companies that allowed private investors to lend their digital assets to earn interest. When Genesis went bankrupt, it owed members of the program $735 million.
“When Gemini notified Genesis that it would be terminating the Earn program in October 2022, Barry reached out to set up a meeting to push Gemini to continue with Earn. He did this knowing that Genesis was massively insolvent. Barry claimed that Genesis was only dealing with a timing issue – a lie that hid the gaping hole on Genesis’ balance sheet.
When Three Arrows Capital (3AC) collapsed in June 2022, it blew a $1.2 billion hole in Genesis’ balance sheet. Instead of coming clean, Genesis claimed everything was normal because DCG stepped in to absorb the losses. It is now clear that this was a carefully crafted lie.”
Winklevoss further alleges that DCG, Silbert, other executives and Genesis made false financial reports to mislead their creditors and maintain the illusion that all was well.
“Barry, DCG and Genesis have all conspired to create false financial reports to hide the truth from Gemini and creditors. A report pretended this bogus 10-YEAR promissory note was a ‘Current Assets’. A total lie and a complete misrepresentation. A falsified balance sheet pretended to be a “receivable” worth $1.1 billion. Another lie.
Genesis’s loan maturity numbers pretended the promissory note didn’t exist because that was the only way to hide it. They literally didn’t factor it into the calculations. Another lie.”
In May, Gemini said Genesis defaulted on a $630 million debt payment even after the companies entered a 30-day mediation period.
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Featured image: Midway through the journey