Crypto exchange Gemini is suing the parent company of bankrupt crypto broker Genesis over the Gemini Earn program, claiming that top executives of the lender mislead creditors.
According to a new report from Reuters, the US-based exchange is suing Digital Currency Group (DCG).
Additionally, in a lengthy thread, Gemini co-founder Cameron Winklevoss says that the crypto exchange has filed a lawsuit against DCG and its chief executive, Barry Silbert, for allegedly personally masterminding a fraud scheme against creditors.
According to Winklevoss, after Gemini decided to end the Earn program, Silbert contacted the firm urging them to continue it knowing that Genesis was “massively insolvent.”
The Earn program was a collaboration between the two companies that allowed retail investors to loan out their digital assets to earn interest. When Genesis went bankrupt, it owed $735 million to members of the program.
“When Gemini notified Genesis it would be terminating the Earn program in October 2022, Barry reached out to set up a meeting to induce Gemini to continue Earn. He did this knowing Genesis was massively insolvent. Barry claimed that Genesis faced only a timing issue – a lie that hid the gaping hole on Genesis’s balance sheet.
When Three Arrows Capital (3AC) collapsed in June 2022, it blew a $1.2 billion hole in Genesis’s balance sheet. Instead of coming clean, Genesis claimed that everything was business as usual because DCG had stepped in to absorb the losses. It’s now clear this was a carefully crafted lie.”
Winklevoss goes on to allege that DCG, Silbert, other executives, and Genesis created false financial reports in order to trick their creditors and maintain the illusion that everything was in order.
“Barry, DCG, and Genesis all conspired to create false financial reports to hide the truth from Gemini and creditors. One report pretended that this phony 10-YEAR promissory note was a ‘Current Asset.’ A total lie and complete misrepresentation. A falsified balance sheet pretended that the note was a ‘receivable’ with a value of $1.1 billion. Another lie.
Genesis’s loan-duration figures just pretended the promissory note didn’t exist, because that was the only way to hide it. They literally didn’t include it in the calculations. Yet another lie.”
In May, Gemini said that Genesis defaulted on a $630 million debt payment even after the firms entered into a 30-day mediation period.
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