Tyler Winklevoss and Cameron Winklevoss (L-R), co-founders of crypto exchange Gemini, onstage at the 2021 Bitcoin Convention in Miami, Florida.
Joe Raedle | fake images
Cameron Winklevoss, co-founder and chairman of digital currency exchange Gemini, has accused the head of cryptocurrency conglomerate Digital Currency Group of engaging in "bad faith" tactics, but insists he wants to resolve a complex lending dispute with the company. which arose in the aftermath of The FTX Collapse.
The dispute stems from a deal Gemini has with Genesis Global Capital, the lending arm of cryptocurrency investment firm Genesis Global Trading, a subsidiary of Digital Currency Group. Gemini offered users returns of up to 8% through its Gemini Earn lending product. To generate those returns, Gemini lent user funds to Genesis Global Capital, which in turn lent them to institutional borrowers.
A few days after FTX filed for bankruptcy, Gemini redemptions on pause for your Gemini Earn Service like Genesis Global Capital also suspended the origination and redemption of new loans. Gemini has denied any exposure to Sam Bankman-Fried's crypto empire, but Genesis said in a Nov. 10 tweet that its derivatives business has approximately $175 million in funds locked up within FTX.
Winklevoss on Monday wrote an open letter to Digital Currency Group boss Barry Silbert, alleging that Silbert refused to meet with the Gemini team on multiple occasions to find a solution to the liquidity crisis facing Gemini Earn clients.
According to the letter, Gemini Earn clients are owed more than $900 million from Genesis.
"Over the past six weeks, we have made every effort to engage with you in good faith and collaboratively to reach a consensual resolution for you to pay the $900 million you owe, while helping you preserve your business. Winklevoss he said in the letter, which was tweeted publicly on Monday.
"We appreciate that there are upfront costs to any restructuring and sometimes things don't go as fast as we all would like. However, it is now becoming clear that he has been engaging in bad faith stalling tactics."
'Beyond the mix'
Winklevoss accused Silbert of hiding behind "lawyers, investment bankers and processes", adding: "After six weeks, his behavior is not only completely unacceptable, it is inconceivable." He also alleged that Digital Currency Group and Genesis are "more than mixed".
digital currency group owes Genesis $1.675 billion. The debts consist of a $575 million liability due May 2023, and a $1.1 billion promissory note that Genesis issued to Three Arrows Capital, which Digital Currency Group absorbed following the collapse of the controversial cryptocurrency hedge fund.
"To be clear, this mess is entirely of your own making. Digital Currency Group (DCG), of which you are the founder and CEO, owes Genesis (its wholly owned subsidiary) ~1.675 billion," Winklevoss said. .
"This is money Genesis owes Earn users and other creditors. You took this money, schoolteachers' money, to fuel greedy stock buybacks, illiquid venture investments, and kamikaze Grayscale NAV [net asset value] operations that triggered the AUM rate generator [assets under management] of your Trust; all at the expense of creditors and all for his own personal gain."
In addition to Genesis, Digital Currency Group also owns Grayscale, the embattled digital asset manager. Grayscale faces difficulties of its own, with its Grayscale Bitcoin Trust trading at 45% off the price of its underlying asset, even as bitcoin trades at multi-year lows.
โDCG did not borrow $1.675 billion from Genesis,โ Silbert said in response to Winklevoss's tweet on Monday.
"DCG has never missed an interest payment to Genesis and is current on all outstanding loans with the next loan due in May 2023," it added. "DCG gave Genesis and its advisors a proposal on December 29 and has not received any response."
'Time is running out'
Despite the heated exchange, Winklevoss said he wants to reach a solution to the liquidity crisis by Sunday. "We remain ready and willing to work with you, but time is running out," he said.
A Gemini spokesperson declined to comment further on the matter when contacted by CNBC.
Winklevoss's allegations against Silbert come as his Gemini crypto exchange faces legal threats from users. A group of investors filed a class action lawsuit against the company, alleging that it sold its Earn interest-bearing accounts without first registering them as securities. Crypto lender BlockFi was forced to pay the Securities and Exchange Commission and 32 states $100 million in fines to settle charges that its retail lending product violated US securities laws.
Three Arrows Capital co-founder Zhu Su also weighed in on the matter on Tuesday. In a Twitter thread, Su said that Digital Currency Group "had substantial losses in the summer due to our bankruptcy" and other companies affected by the failure of algorithmic stablecoin terraUSD. His, whose company collapsed into insolvency After making long-shot bets across the industry, he has been active on Twitter even as lawyers seek to establish his whereabouts and is reportedly facing investigations by US regulators.
Gemini and Genesis are the latest firms to get caught up in the messy and tangled contagion resulting from FTX's plunge into bankruptcy last year.
Evgeny Gaevoy, the founder and CEO of crypto marketplace creator Wintermute, said in an interview in November that the industry contagion is expected to be widespread โbecause anyone in the crypto space and beyond crypto could have been exposed to them in one way or another. way or another." Wintermute itself had funds locked up in FTX, the amount of which was "within our risk tolerances and does not have a significant impact on our overall financial position," according to a Nov. 9 report. cheep.
โ CNBC's Ari Levy, MacKenzie Sigalos and Rohan Goswami contributed to this report.
