Cameron Winklevoss, co-founder of the cryptocurrency exchange Gemini, has penned an open letter to the board of Digital Currency Group, or DCG, saying CEO Barry Silbert was “unfit” to run the company.
In a Jan 10. letter, Winklevoss claimed Silbert and Genesis Global Capital — a subsidiary of DCG — had defrauded more than 340,000 users who were a part of Gemini’s Earn program. The letter followed a Jan. 2 appeal on Twitter to Silbert directly, in which the Gemini co-founder said Genesis owed Gemini $900 million, accusing the CEO of hiding “behind lawyers, investment bankers, and process.” Gemini later notified its users that it had terminated its Earn program effective as of Jan. 8.
According to Winklevoss, Genesis lent more than $2.3 billion to Three Arrows Capital, a move which ultimately left the crypto firm with a loss of $1.2 billion once the hedge fund failed in June 2022. He claimed Silbert, DCG, and Genesis orchestrated "a carefully crafted campaign of lies" starting in July 2022 in an effort to show DCG had injected the funds into Genesis by including a 10-year promissory note as part of its assets.
Winklevoss alleged Genesis CEO Michael Moro was complicit in this duplicity, by issuing “false and misleading” statements on social media regarding DCG providing capital to Genesis. In addition, he claimed certain DCG personnel had worked behind the scenes to cover the lack of “adequate capitalization” at Genesis.
According to the Gemini co-founder, any accounting irregularities of which DCG and Silbert had been a part might have been overlooked had FTX not collapsed within a matter of months. He alleged there were “recursive trades” between Three Arrows and the Grayscale Bitcoin Trust in what he called “effectively swap transactions” for Genesis of Bitcoin (BTC) for GBTC — a move in which Genesis eventually lost and did not adequately report on its balance sheets.
“These misrepresentations [...] were a sleight of hand designed to make it appear as if Genesis was solvent and able to meet its obligations to lenders, without DCG actually committing to the financial support necessary to make this true. DCG wanted to have its cake and eat it too.”
In a statement to Cointelegraph, a DCG spokesperson called the letter a "desperate and unconstructive publicity stunt," claiming Winklevoss and Gemini were "solely responsible for operating Gemini Earn and marketing the program to its customers." The firm suggested it could pursue legal action if necessary.
Silbert addressed some of Winklevoss' claims in a Jan. 10 letter to shareholders, in which he said Genesis had a "trading and lending relationship" with both Three Arrows and Alameda Research. He added that DCG did not receive any "cash, cryptocurrency, or other form of payment" for a $1.1-billion promissory note for Genesis' liabilities.
"DCG currently owes Genesis Capital (i) $447.5M* in USD and (ii) 4,550 BTC (~$78M), which matures in May 2023," said Silbert. "DCG borrowed $500M in USD between January and May 2022 at interest rates of 10%-12%."
Unlike in his Jan. 2 letter, Winklevoss directly called on the DCG board to remove Silbert in an effort to provide a resolution for Earn users. In response to that letter, Silbert claimed “DCG did not borrow $1.675 billion from Genesis” and “never missed an interest payment to Genesis and is current on all loans outstanding.”
"There is no path forward as long as Barry Silbert remains CEO of DCG," said Winklevoss. "He has proven himself unfit to run DCG and unwilling and unable to find a resolution with creditors that is both fair and reasonable. As a result, Gemini, acting on behalf of 340,000 Earn users, requests that the Board remove Barry Silbert as CEO.”
This article was updated on Jan. 10 to include a response from Digital Currency Group and Barry Silbert.