Winklevoss twins sue crypto investor DCG after restructuring dispute

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Billionaire twins Tyler and Cameron Winklevoss have sued SoftBank-backed crypto firm Digital Currency Group and its chief executive Barry Silbert, alleging they engaged in fraud to mislead investors.

The lawsuit, filed Friday in a New York court, escalates a months-long dispute between former Olympic rowers and DCG as both sides try to contain the fallout from the collapse of cryptocurrency exchange FTX.

DCG cryptocurrency broker Genesis was forced to put its lending unit into Chapter 11 bankruptcy earlier this year following the implosion of FTX, trapping funds from investors.

DCGs Genesis was one of the largest lenders in the crypto market, allowing customers to lend their coins in exchange for high returns. Genesis owes creditors more than $3 billion, including $766 million owed to retail customers of the Winklevosss Gemini exchange, according to bankruptcy filings.

DCG, Genesis and Gemini have been mediating in bankruptcy court for months, but the Winklevoss twins have grown increasingly vocal in their criticism of Silbert and his crypto companies.

At the heart of Geminis’ allegations against DCG and Silbert is a $1.2 billion promissory note, which they claim was misrepresented to creditors in order to conceal DCG and Genesis’ financial positions. This lawsuit concerns fraud, according to the documents.

He alleged that DCG and Silbert engaged in a fraudulent scheme to induce Geminis customers to continue lending massive amounts of cryptocurrency and US dollars to Genesis, by touting allegedly robust risk management practices and a supposedly thorough verification process of who the assets were lent to. . They were lies, the lawsuit claims.

Gemini and Genesis had engaged in a crypto-lending program called Earn, where retail investors would place their funds with Gemini who would lend them to Genesis, who in turn would lend the tokens to other companies. The Genesis bankruptcy affected 340,000 Geminis retail investors, whose funds remain trapped, as well as thousands of other investors whose coins were loaned to the broker.

With backing from SoftBank, Singapore sovereign wealth fund GIC, and Google CapitalG, DCG has become one of the largest venture capital portfolios in the crypto markets. The Connecticut-based group, valued at $10 billion in 2021, owns businesses including asset manager Grayscale and business news site CoinDesk.

Any suggestion of wrongdoing by DCG or any of its employees is baseless, defamatory and completely untrue, DCG said in response. The mediation process is coming to an end and we expect to close the Genesis Chapter 11 case soon, he added.

In January, the United States Securities and Exchange Commission dealt the two companies another blow by suing Gemini and Genesis, accusing their crypto-lending program of not being properly registered as a securities offering.

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