The Digital Currency Group, or DCG, is a Stamford, Connecticut-based conglomerate that is the parent company of several high-profile cryptocurrency firms, including digital currency-focused news site CoinDesk and asset management firms Grayscale and Genesis, which both broker digital assets for financial institutions like hedge funds and asset managers. (Related: Investors are leaving the cryptocurrency industry en masse as collapse continues.)
Winklevoss' letter, published Jan. 10, claimed that Silbert, along with Genesis Global Capital, one of its subsidiaries, had defrauded more than 340,000 users who were part of Gemini's Earn program.
Winklevoss partnered with DCG-owned Genesis to offer the yield product Gemini Earn last year. However, on Nov. 16, Genesis announced that its lending business would be halting withdrawals, which then affected the ability of Gemini Earn customers to access their funds.
This prompted Winklevoss to accuse Silbert of hiding "behind lawyers, investment bankers and process" to avoid returning the funds of Gemini's customers. Winklevoss claimed Genesis owed Gemini over $900 million.
"There is no path forward as long as Barry Silbert remains CEO of DCG," wrote 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."
In a statement to media outlets, a spokesperson for DCG called Winklevoss' open letter a "desperate and unconstructive publicity stunt." The spokesperson added that Winklevoss and Gemini are solely to blame for operating and marketing Gemini Earn to their customers.
The spokesperson added that the DCG could pursue legal action if necessary.
A spokesperson for Genesis noted that the company was disappointed that Gemini was "waging a public media campaign despite ongoing productive private dialogue between parties."
"We remain focused on finding a solution for our borrowing and lending intermediation business and reaching the best outcome for all affected Genesis lending and Gemini Earn clients," he added.
In his letter, Winklevoss claimed that Genesis lent more than $2.3 billion to the Three Arrows Capital, which left the company with a loss of $1.2 billion when that company went defunct in June 2022. From then on, Winklevoss claims that Silbert, DCG and Genesis began "a carefully crafted campaign of lies" in an effort to show that DCG had injected funds into Genesis by including a 10-year promissory note as part of its assets.
None of this money ever materialized to allow Gemini and Gemini Earn users to withdraw their funds, according to Winklevoss.
In his rebuttal to Winklevoss' open letter, Silbert, in a letter to shareholders, noted that Genesis had a "trading and lending relationship" with both Three Arrows Capital and Alameda Research. He added that DCG has never received any "cash, cryptocurrency or other forms of payment" for the $1.1 billion promissory note for Genesis' liabilities.
"DCG currently owns Genesis Capital (i) $447.5M and (ii) 4,550 BTC (~$78M), which matures in May 2023," wrote Silbert. "DCG borrowed $500 million between January and May 2022 at interest rates of 10-12 percent."
Silbert further claimed that "DCG did not borrow $1.675 billion from Genesis" and "never missed an interest payment to Genesis and is current on all loans outstanding."
While it waits for further responses from DCG, Gemini has formed a committee of creditors to try and recoup the funds it says it and others are owed by Genesis.
Visit MoneySupply.news for more stories like this.
Watch this episode of "Liberty and Finance" discussing the collapse of the cryptocurrency industry.