On Monday, Gemini co-founder Cameron Winklevoss published an open letter to fellow billionaire Barry Silbert, the chief exec of Digital Currency Group (DCG), explaining Gemini’s side of an ongoing dispute with DCG and its subsidiary, Genesis Global Trading.
In the letter, Winklevoss gave Silbert a short deadline to publicly commit to resolving the situation that led to Gemini Earn suspending withdrawals. The famous twin accused Silbert of ignoring previous attempts to work together, claiming the DCG chief hoped that it would “just magically go away.”
He claims Silbert agreed to meet to discuss a proposal and then never followed through when Gemini submitted two. Now, Winklevoss demands that Silbert commit to finding common ground by January 8.
Details of Cameron Winklevoss’ letter
Genesis Trading currently owes Gemini $900 million through its previous partnership with Gemini Earn. Winklevoss says the money belongs to Gemini Earn’s depositors — who are “not just numbers in a spreadsheet.”
Winklevoss claimed that DCG currently owes Genesis — its own subsidiary — $1.675 billion. He accused Silbert of using that money to buy back shares, fund illiquid investments, and boost Grayscale funds’ net asset value (NAV) instead of paying off third-party debt.
For his part, Silbert has denied that DCG borrowed $1.675 billion specifically. However, he didn’t contest that DCG does owe Genesis money. He insists that DCG is current on all its interest payment obligations.
Silbert also claims that DCG delivered a proposal to Genesis and Gemini’s advisors on December 29 and hasn’t received a response.
Some of Grayscale’s funds have been trading at a steep discount compared to their NAV. Its second-largest, the Grayscale Ethereum Trust (ETHE), recently traded down to a 60% discount-to-NAV. Grayscale’s largest trust, the Grayscale Bitcoin Trust (GBTC), traded as deep as a 50% discount to its NAV.
Speculators are concerned that Grayscale’s funds held in trust might get liquidated, potentially causing already vulnerable markets to crash even lower. Even Three Arrows Capital (3AC) co-founder Su Zhu took a swipe at Gemini over the holiday season, accusing it of deliberately making it more difficult for users to sue. For reference, Genesis Trading has notably filed a $1.2 billion claim in 3AC’s bankruptcy case.
Gemini has formed a creditors’ group as part of its efforts to resolve the issue with Genesis. It hired the law firm Kirkland & Ellis and onboarded investment banking firm Houlihan Lokey as a financial advisor.
Lawsuits threaten to escalate disputes in court
It could very well be that, on its own, the threats in Winklevoss’ letter won’t be enough. However, some Gemini Earn users have taken matters into their own hands. Lead plaintiffs have filed a class action lawsuit against Genesis and DCG, alleging that DCG attempted to actually hide Genesis’ insolvency.
It was previously reported that DCG quietly bought the debt that 3AC owed to Genesis with a $1.1 billion promissory note due by 2033.
A separate lawsuit alleges that Gemini failed to register Gemini Earn’s interest-bearing accounts as securities. Similar interest-bearing accounts by companies like BlockFi and Voyager were found by US regulators to be securities.