Winklevoss' Salvo on Silbert Opens New Year on Combative Note

Gemini Co-founder Accuses DCG Honcho of Mismanagement and 'Bad Faith'

By: Samuel Haig Loading...

Winklevoss' Salvo on Silbert Opens New Year on Combative Note

In an extraordinary clash that exposes the deepening stress in the cryptocurrency industry, Cameron Winklevoss accused fellow entrepreneur Barry Silbert on Monday of imperiling the life savings of thousands of customers of Earn, an offering supported by the Winklevoss twins’ Gemini exchange.

Cameron Winklevoss said Silbert, the founder and CEO of Digital Currency Group, a crypto conglomerate that controls the Genesis exchange and lending outfit, is dragging his feet on dealing with the $900M Genesis owes Gemini’s Earn customers.

Dire Straits

“Earn users are tired. They’re scared. Many are now in dire straits,” Winklevoss wrote in an open letter to Silbert posted to Twitter.

The accusations come after Genesis suspended its lending business on Nov. 16, with Winklevoss claiming DCG owes a whopping $1.6B to Genesis, its wholly-owned subsidiary.

“For the past six weeks, we have done everything we can to engage with you in good faith and a collaborative manner in order to reach a consensual resolution for you to pay back the $900 million that you owe,” Winklevoss wrote. “It is now becoming clear that you are engaging in bad faith stall tactics.”

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The Defiant The Defiant

Silbert countered in a tweet that DCG did not borrow the $1.675B from Gemini and had not missed any interest payments. He also denied failing to address questions about customer assets.

“DCG delivered to Genesis and your advisors a proposal on Dec. 29 and has not received any response,” Silbert wrote.

Winklevoss demanded that Silbert “publically commit” to solving the problem by Jan. 8. His blistering letter makes clear he’s ready to ratchet up the rhetoric and allegations — Winklevoss accused Silbert and DCG of manipulating customer assets to burnish its financial performance.

Acrimony and Angst

“You took this money — the money of schoolteachers — to fuel greedy share buybacks, illiquid venture investments, and kamikaze Grayscale NAV trades that ballooned the fee-generating AUM of your trust,” Winklevoss wrote.

The conflict demonstrates the acrimony and angst coursing through the industry in the wake of a catastrophic year. The Winklevoss brothers and Silbert were among the most influential and high-profile evangelists for decentralized finance in recent years. Now they are scrambling to stabilize their respective operations.

Online Spat

DCG’s Grayscale family of digital asset trusts have sought to attract institutional and retail investors into the space, and the company is determined to convert its flagship, Grayscale Bitcoin Trust, into an exchange-traded fund to make it more accessible to ordinary investors. Last year, the U.S. Securities and Exchange Commission rejected Grayscale’s application.

With the crypto market losing about two-thirds of its value in 2022, the industry is kicking off the new year with two of its leading figures engaged in nasty online spat.

‘You took this money — the money of schoolteachers — to fuel greedy share buybacks, illiquid venture investments.’

Cameron Winklevoss

The dispute stems from a deal Gemini entered into with Genesis and its Earn offering last year. Under the arrangement, Earn’s customers could make an annual return of up to 8% on assets loaned to Genesis, an exchange that allows users to trade digital tokens such as Bitcoin.

Five days after FTX went bankrupt on Nov. 11, Genesis said it was forced to halt withdrawals and new loan originations because of its exposure to the crippled crypto exchange.

Gemini suspended its Earn product on the same day. Then began a long wait to get Earn customers back their money. Winklevoss claims Genesis owes Gemini’s 340,000 Earn customers $900M.

Legal Challenge

On Dec. 27, Earn’s customers filed a legal action against Gemini arguing users holding assets on the platform were “effectively wip[ed] out” when Gemini halted Earn in mid-November.

In his letter, Winklevoss said Genesis has failed to adequately discuss a restructuring plan for six weeks.

“On December 2nd we expressed our belief ‘that getting everyone in a room together as soon as possible will be the most productive path towards reaching a resolution’,” Winklevoss said, adding that Silbert agreed on the condition “there was a proposal on the table.”

But Gemini’s founder accuses Silbert of refusing to meet despite Winklevoss stating his team delivered proposals to Genesis on Dec. 17 and Dec. 25. “Every time we ask you for tangible engagement, you hide behind lawyers, investment bankers, and process,” Winklevoss said. “After six weeks, your behavior is not only completely unacceptable, it is unconscionable.”

Winklevoss also suggested Silbert was being disingenuous by denying DCG owes $1.675B to Genesis. Even though different entities in the DCG group may hold the debt, Winklevoss said the two firms are “beyond commingled” and alleged the funds were used by DCG for risky trades and investments.

On Jan 2, AP_Abacus, an influencer and investor, tweeted that a legal advisor to Gemini expects DCG will fail to meet the Jan. 8 deadline and is prepared for “a protracted legal battle.”

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The Defiant The Defiant

There appears to be little love lost for Winklevoss and Gemini on social media.

“While I agree with the sentiment that Genesis royally f***ked up here, SO DID YOU GUYS,” tweeted iamDCinvestor, a popular crypto influencer. “You selected Genesis, you promised users a return from Earn deposits, and apparently you didn’t do your due diligence. Where is YOUR OWN acceptance of responsibility to Earn users here?”