In an effort to keep the Earn program going, Gemini co-founder Cameron Winklevoss claimed Barry Silbert committed fraud by knowing Genesis was “massively insolvent” in advance.
Digital Currency Group (DCG) and its CEO, Barry Silbert, are being sued by Gemini, a cryptocurrency exchange based in the US, for “fraud against creditors.” A huge sum of bitcoin and US dollars were allegedly lent to Genesis, a DCG subsidiary, as part of a scam, according to the lawsuit, which was filed on July 7th in a New York court. The defendants, DCG and Silbert, are also named.
Gemini is attempting to recoup the money it spent as a result of allegedly misleading statements and omissions made by Silbert and DCG. They are charged with inciting and supporting Genesis’ fraud against Gemini in the deal. Gemini also intends to take Genesis’ bankruptcy case to court.
In collaboration with Gemini, Genesis ran the Earn program, which let users borrow cryptocurrency with the prospect of interest-bearing payback. In November 2022, the program, alleging market unrest, stopped withdrawals; as a result, it filed for Chapter 11 bankruptcy.
Silbert attempted to maintain the Earn program despite knowing about Genesis’ collapse, claims Gemini co-founder Cameron Winklevoss. Winklevoss asserts that Genesis and DCG owe Gemini’s clients $900 million. Beginning with the failure of Three Arrows Capital in June 2022, which had an effect on Genesis’ balance sheet, the complaint charges misleading financial reporting by DCG and Silbert.
Silbert and other DCG executives are charged by Winklevoss with conspiring to fabricate financial reports in order to conceal the truth from Gemini and creditors. He asserts that DCG’s top levels are affected by the deception. According to the lawsuit, numerous lies were told to Gemini and other creditors in order to hide the reality.
The Earn program’s consequences prompted regulatory investigation of Genesis and Gemini. The two companies were named in a complaint brought by the U.S. Securities and Exchange Commission (SEC) in January on grounds of the issuance of unregistered securities. Additionally, according to reports, Gemini is the subject of an inquiry by the New York Department of Financial Services into allegations involving its Earn program.
Gemini is suing DCG and Silbert as part of its endeavor to make those guilty for the alleged fraudulent conduct accountable. The case highlights the difficulties and dangers that come with running loan programs in the cryptocurrency sector, especially when working with organizations that are having financial problems.
The result of the legal action will have an impact on the cryptocurrency market, notably in terms of regulatory control and the responsibility of businesses engaged in lending and investment operations. It emphasizes how crucial transparency and compliance are to upholding confidence and safeguarding the interests of users and investors.