After threatening to do so for months, Gemini Trust Company accused Digital Currency Group (DCG) and its CEO Barry Silbert of fraud in a lawsuit filed Friday.
In the complaint, the New York-based crypto exchange accuses DCG—parent company of bankrupt digital asset firm Genesis—and its founder of making “false, misleading, and incomplete representations and omissions to Gemini.”
Gemini and Genesis have been locked in a public battle over Gemini Earn, a program that allowed users to receive between 0.45% and 8% interest in exchange for depositing their crypto assets. Genesis was the primary partner for the service.
Gemini said it was lead to believe that its Earn customers’ funds were being lent out by Genesis in a way that minimized risk while generating a return on their deposits.
“Those were lies,” Gemini wrote in its lawsuit. “As it turned out, Genesis was recklessly lending huge amounts to a counterparty that Defendants knew was using these huge amounts to fuel a risky arbitrage trading strategy.”
A couple hours after the lawsuit was filed, DCG released its own statement claiming that “neither Cameron nor Tyler Winklevoss has been involved in any of the recent in-person meetings” for the mediation process between the two firms.
“This is yet another publicity stunt from Cameron Winklevoss to deflect blame and responsibility from himself and Gemini, which operated the Gemini Earn program,” a DCG spokesperson told Decrypt in an email. “Any suggestion of wrongdoing by DCG or any of its employees is baseless, defamatory, and completely false.”
DCG, which owns Genesis and the crypto asset manager Grayscale, is a behemoth in the crypto industry.
During the heyday of late 2021, when the global crypto market cap was at an all-time high of $3 trillion, DCG had an estimated $50 billion in assets under management. But by the end of last year, the company wrote in a fourth quarter report to investors that it had $5 billion on its balance sheet.
Silbert and DCG asked for more time in January. Then, in February, there appeared to be an agreement between the firms for repayment. But by late May, things had already soured: Genesis missed a $630 million loan payment.
Gemini made a final offer to restructure Genesis’s debt in order to avoid a lawsuit earlier this week and published an open letter—one of several—alleging that Silbert engaged in “fraudulent behavior.”
