After several months of threats, Gemini takes legal action against DCG and Barry Silbert.
Gemini, an American cryptocurrency exchange, has filed a lawsuit against Digital Currency Group (DCG) and its founder, Barry Silbert.
The legal action, which emerged on July 7th, alleges Silbert and his conglomerate committed "fraud against creditors" through their subsidiary Genesis, which managed funds related to Gemini's Earn program.
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According to the New York County Supreme Court filing, Gemini's lawsuit aims to retrieve its funds from DCG.
In particular, the lawsuit claims that DCG and Silbert lent "huge amounts of cryptocurrency and US dollars" to Genesis Digital. It is worth noting that Gemini's collaboration with Genesis allowed its users to earn up to a 7.4% annual percentage yield, wherein Gemini forwarded its customer funds to Genesis, who subsequently loaned them to entities such as the now-collapsed Three Arrows Capital.
The lawsuit further alleges that Silbert, knowing Genesis was "massively insolvent," urged Gemini to persist with its Earn program and took other actions to conceal Genesis' billion-dollar gap in its balance sheet. It is worth noting that six months ago, Genesis filed for bankruptcy.
Cameron Winklevoss, the Gemini co-founder, used social media to express his views. The man pointed the finger directly at Silbert as "the architect and mastermind of the DCG and Genesis fraud against creditors."
In their defense, DCG dismissed the allegations as "defamatory" and labeled the filing as a "publicity stunt." DCG's tweet states:
Senior DCG leadership has been working around the clock over the course of multiple months in active negotiation with representatives of the Official Unsecured Creditors Committee and Ad Hoc Committee to reach a deal while Gemini's leadership was MIA [missing in action] or only issuing press statements.
The lawsuit seeks damages, attorney's fees, and "any other relief that is deemed just and proper" for alleged fraud and aiding and abetting fraud. Notably, this legal action surfaces amidst another lawsuit by the US Securities and Exchange Commission against Gemini and Genesis over the Earn product, claiming it was an unregistered securities offering.
