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Recently, the Winklevoss twins filed a lawsuit against SoftBank-backed crypto company Digital Currency Group (DCG) and its CEO Barry Silbert in a New York court. They accuse the company and Silbert of engaging in fraud in order to deceive investors.
The dispute between the former Olympic rowers and DCG began when the crypto exchange FTX went bankrupt and DCG’s Genesis business was forced to file for Chapter 11 bankruptcy protection. Genesis, a cryptocurrency broker, is reported to owe creditors more than $3 billion, with over $766 million owed to Gemini’s retail customers.
At the center of Gemini’s accusations against DCG and Silbert is a $1.2 billion promissory note. The lawsuit claims that this note was misrepresented in order to hide DCG and Genesis’ financial situation.
The Winklevoss’ Gemini and Genesis had been involved in a crypto-lending program called Earn. This program allowed retail investors to place their funds with Gemini, which then lent them to Genesis, who lent them out to other companies. The bankruptcy of Genesis has resulted in over 340,000 of Gemini’s investors having their funds trapped, as well as thousands of other investors whose coins were lent to the broker.
DCG is one of the largest venture portfolios in the crypto market and has support from SoftBank, Singapore’s sovereign wealth fund GIC, and Google’s CapitalG. In response to the allegations, DCG stated that any suggestion of wrongdoing is “baseless, defamatory and completely false,” and that they are expecting to bring the Genesis Chapter 11 case to a close soon.
Adding to the problems, the US Securities and Exchange Commission sued both Gemini and Genesis in January 2021, claiming that their crypto-lending program was not properly registered as a security offering.