Gemini Exchange Sues DCG And CEO Barry Silbert

The Gemini cryptocurrency exchange has sued Digital Currency Group and the CEO, Barry Silbert. Gemini filed this lawsuit on Friday in a trial court in New York. In the lawsuit, Gemini has accused DCG and Silbert of encouraging and facilitating fraud conducted by Genesis against the company.

Gemini sues Digital Currency Group

Gemini is a cryptocurrency exchange based in New York that offers a Gemini Earn Program. The program lent out these digital assets to the Genesis platform to generate profits. In the lawsuit, Gemini has claimed that Genesis, and its parent company, DCG, lied about the “purportedly robust risk-management practices.”

Gemini also says that Genesis started lending huge amounts to DCG and Silbert, with the amounts being used to promote a risky arbitrage trading strategy. In November, after FTX filed for bankruptcy, Genesis halted withdrawals because of “unprecedented market turmoil.”

The lender also sought $1 billion worth of emergency loans from investors. During this court filing, Gemini said that Genesis did not honor its debt to Earn Program lenders. The co-founder of Gemini, Cameron Winklevoss, had earlier claimed that DCG owed its customers more than $900 million.

Gemini claims DCG was not truthful

The complaint by Gemini has also said that the exchange wants to recover the damages and losses that it had generated because of the false, misleading, and incomplete representations to the firm.

The Gemini exchange has also said that the founder of DCG made a false representation that the parent had absorbed losses worth $1.2 billion that Genesis incurred following its exposure to the bankrupt crypto lender Three Arrows Capital. Silbert has also said that the infusion was made through a promissory note that was not activatable until 2032.

Gemini said that Silbert was aware that Genesis was insolvent but failed to disclose the same to Gemini. The exchange further said that Silbert further alleged that while the Genesis loan portfolio was complex, it could be unwound successfully within a reasonable period.

Gemini also noted that Silbert told the exchange that Genesis had only suffered a short-term mismatch in the timing for its loan portfolio. Gemini also concealed the reality that Genesis had a gap in the balance sheet, and it would fail to honor its obligations to Gemini and others as DCG had not assumed the losses by 3AC.

Genesis filed for bankruptcy protection in January 2023. Since then, Gemini has been working with Genesis in restructuring to maximize the recovery process for the Gemini Earn lenders without any prolonged delays. The exchange has also said that it was pursuing cases against Genesis as part of the bankruptcy case.

Winklevoss has also said that the fraud against Gemini went to the very top of the company. He wrote that DCG and Barry had directly participated in the fraud that affected Gemini and hundreds of thousands of users on the Gemini Earn program. The executive further said that the complaint was a key step in holding these users accountable for what they had done.