Crypto exchange Gemini has sued Digital Currency Group (DCG) and its founder Barry Silbert on Allegations of fraud. Specifically, Gemini co-founder Cameron Winklevoss is pursuing the case to prove that Silbert was responsible for the losses of creditors.
The lawsuit is accusing DCG and Barry Silbert of committing “fraud” against the exchange’s customers. It states that DCG and its CEO, Barry Silbert induced depositors to lend “huge amounts of cryptocurrency and U.S. Dollars” to Genesis through “false, misleading, and incomplete representations” of the company’s financial position and “robust risk-management practices.”
“Those were lies,” the filing states “As it turned out, Genesis was recklessly lending huge amounts to a counterparty that Defendants knew was using these huge amounts to fuel a risky arbitrage trading strategy.”
Gemini has incurred losses due to customer funds it lent to Genesis, a crypto lending platform owned by DCG, through Gemini Earn. As Genesis went bankrupt due to insolvency in January this year, Gemini has been sued concerning the Earn program when it had to halt customer withdrawals. Gemini is therefore seeking relief including actual damages, punitive damages, and attorney’s fees.
Cameron maintains that Barry was willfully and consciously involved in the fraud which led to huge losses for many of its customers.
“DCG — and Barry personally – are direct participants in the fraud that has damaged Gemini and hundreds of thousands of Earn users,” said Gemini co-founder Cameron Winklevoss over Twitter on Friday. “This complaint is an important step in holding them accountable for what they have done.”
Prior to the lawsuit which came on Friday, Cameron had been in a negotiation with Silbert on out of court settlement of roughly $1.5 billion. He gave Silbert an ultimatum of 7 July to respond or face a lawsuit. Apparently, Silbert did not comply, hence the lawsuit.
In a Twitter thread, Cameron stated among other things that Silbert knowingly talked Gemini into continuing the Earn program with the hopes of recovering its customer’s funds. This did not happen and has caused damage to both Gemini and its customers, Cameron said.
“When Gemini notified Genesis it would be terminating the Earn program in October 2022, Barry reached out to set up a meeting to induce Gemini to continue Earn. He did this knowing Genesis was massively insolvent,” Winklevoss tweeted sharing the lawsuit on Twitter. “Barry claimed that Genesis faced only a timing issue – a lie that hid the gaping hole on Genesis’s balance sheet,” the Gemini co-founder added.
Gemini Seeks to Recover Losses
Through this lawsuit, Cameron, Gemini, and its customers seek to recover the losses they suffered as a result of decisions Silbert and DCG made which he says were fraudulent.
“This lawsuit seeks to recover from Defendants the damages and losses that Gemini has incurred as a direct result of DCG’s and Silbert’s false, misleading, and incomplete representations and omissions to Gemini, and Defendants’ role in encouraging and facilitating Genesis’s fraud against Gemini,” the filing alleges. The court filing further insists:
The court filing has Gemini Trust Company listed as the plaintiff while Digital Currency Group and Barry Silbert are named as defendants. There has been no statement from Silbert or DCG in response to Cameron’s series of tweets, neither has there been any response with respect to the filing at the time of writing this report.