Cryptocurrency
exchange Gemini has dragged bankrupt digital lender Genesis’ parent company,
Digital Currency Group (DCG), and its CEO, Barry Silbert, to court. In a lawsuit filed today (Friday) before a trial court in New York, the exchange
accused both parties of “encouraging and facilitating” Genesis’ fraud against the firm.
According
to the New York-based exchange, thousands of its users signed up for Gemini Earn Program under which
they lent out their digital assets to Genesis in order to earn profit. However,
Gemini in cooperation with its parent company lied about its
“purportedly robust risk-management practices,” Gemini alleged in its court filing.
Instead,
Genesis “was recklessly lending huge amounts to a counterparty [DCG and
Silbert] knew was using these huge amounts to fuel a risky arbitrage trading
strategy,” Gemini contended. In November, following FTX’s collapse and subsequent bankruptcy
filing in New York, Genesis paused withdrawal on its platform, citing
“unprecedented market turmoil.” The lender even sought a $1 billion
emergency loan from
investors.
In the court filing, Gemini said Genesis as a result of this exposure
failed to
honour its debt to the Earn Program lenders. Cameron Winklevoss, the
Co-Founder of Gemini, has previously claimed that DCG was owing its customers over $900 million. On Tuesday, the CEO even
proposed a ‘best and final offer’ of $1.47 billion in phased repayments to Gemini, to be
completed by 2028.
DCG Lied About Absorbing Genesis’ Losses: Gemini
In its complaint,
Gemini said it wants to recover damages and losses it had racked up as a direct
result of Silbert’s “false,
misleading, and incomplete representations and omissions” to its firm.
Specifically, Gemini contended that the DGC Founder ‘falsely represented’ that the
parent company had absorbed, through a $1.1 billion infusion, losses totalling
$1.2 billion that Genesis incurred due to its exposure to the now-bankrupt crypto
lender Three
Arrow Capital (3AC). Ultimately, Silbert revealed that the
supposed infusion
was a promissory note not activatable until 2032.
“In direct
reliance on Silbert’s misrepresentations, Gemini elected to delay the
termination of the Gemini Earn Program—and not to explore the…
