Gemini Sues Digital Currency Group and Founder Barry Silbert, Alleging ‘Fraud’

Gemini, a crypto trust, on Friday sued Digital Currency Group, alleging that the industry conglomerate and its founder Barry Silbert committed “fraud” through DCG subsidiary Genesis, which raised funds for Gemini in connection with Earn, the latter company’s Earn program. A filing filed with the New York County Supreme Court said the lawsuit was aimed at recovering Gemini’s funds from DCG. Gemini has created a partnership between Genesis and its clients that allows them to earn an annual percentage of up to 7.4%. Gemini sent his clients’ funds to Genesis, who then lent them to companies like Three Arrows Capital, which is now defunct. Like Genesis, AskFX is a DCG subsidiary. The filing states: “Genesis, in cooperation with the Defendants and with their active support and encouragement, from the outset encouraged the Gemini Earn Lenders to lend assets by using Genesis’ allegedly robust risk management practices and a allegedly touting strict vetting of counterparties.” “Those were lies.” The lawsuit alleges that Silbert asked Gemini to continue his earn program, even though he “didn’t know at the time was aware when Genesis was massively bankrupt” and that he took other measures to hide Genesis’ billion-dollar hole in its balance sheet. Genesis filed for bankruptcy in January 2023. The filing criticized DCG for announcing that it had accepted the loss of Three Arrows Capital, calling it “wrong”. According to records, Genesis has not paid for redemption requests since mid-November. In a tweet, Gemini co-founder Cameron Winklevoss, who previously invited Silbert to a Twitter space without attorneys, called Silbert “the architect and mastermind of DCG and Genesis Fraud against Creditors.” The lawsuit seeks damages, attorneys’ fees and “every other remedy that is deemed fair and reasonable.” DCG responded to his tweet by calling the claims “defamatory”. The submission was also described as a “publicity stunt”. “Senior DCG management has been actively negotiating with the Official Unsecured Creditors Committee and Ad Hoc Committee for several months to reach an agreement, while Gemini’s top leadership MIA [missing in action] “Or just issued press statements” , says the tweet. Gemini and Genesis are also facing a lawsuit from the Securities and Exchange Commission over Gemini Earn’s offering. The lawsuit was filed in January and alleged that Gemini Earn was an unregistered securities offering. UPDATE (July 7, 2023 at 15:45 UTC). Adds additional details. UPDATE (July 7, 16:05 UTC). Adds DCG response. UPDATE (July 7, 16:25 UTC). Adds context to SEC lawsuit