The dispute between Gemini and the cryptocurrency conglomerate Digital Currency Group (DCG) is entering the next phase. CEO Cameron Winklevoss, in another open letter, demands the repayment of all customer funds under the "Gemini Earn" program and threatens DCG founder Barry Silbert with legal action.
Gemini is the fourth-largest trading platform in the United States, following global leading cryptocurrency exchanges Coinbase, Kraken, and Binance. Founded in 2015 by the Winklevoss twins, the exchange was considered an early player in the field. Since 2021, Gemini has offered interest rates of up to 8% on customer deposits in addition to its trading services through the "Earn" program. Behind the scenes, crypto lender Genesis Global managed the funds. However, since its liquidity crisis in November 2022, over 232,000 Earn customers have been waiting for $1.2 billion in deposits. Gemini now intends to take legal action against the parent company, Digital Currency Group, as stated in the CEO's open letter.
Subscribe to our newsletter
The best articles of the week, directly delivered into your mailbox.
Insolvency cases from the previous year lead to a debt spiral
The issues faced by the cryptocurrency exchange stem from the extensive liquidity crisis in 2022. DCG subsidiary Genesis was an institutional crypto lender that loaned funds from customers like Gemini to market makers and trading firms. In return, the company received attractive double-digit interest rates. However, following the Terra/Luna debacle, a debt spiral spread throughout the industry. As the most prominent player, for example, crypto hedge fund Three Arrows Capital had to take on new loans to save its positions suffering in the bear market, with $1.2 billion provided by Genesis.
Following the insolvency of the hedge fund, the parent company DCG absorbed these losses. However, the collapse of the FTX/Alameda construct increased the balance sheet deficit to an unsustainable level. Payouts to customers like Gemini were halted, and in mid-January 2023, Genesis filed for bankruptcy with over $3 billion in debt. According to the Gemini CEO, there has been no repayment plan from the parent company, Digital Currency Group, which still owes Genesis $1.65 billion.
Gemini presents DCG with a "final offer"
In his open letter to DCG founder Barry Silbert, Cameron Winklevoss accuses the cryptocurrency conglomerate of deliberately deceiving Genesis customers. The group did not actually absorb the $1.2 billion hole left by Three Arrows, and DCG has been overdue on a repayment of $630 million for two months. The company now has two days to respond to an ultimatum. Otherwise, Gemini will file a lawsuit against Digital Currency Group and CEO Barry Silbert personally.
