Gemini, a cryptocurrency trust firm, has filed a lawsuit against Digital Currency Group (DCG) and its founder Barry Silbert, alleging fraudulent activities.
According to the lawsuit filed with the New York County Supreme Court, Gemini seeks to recover funds entrusted to DCG subsidiary Genesis for its Earn program.
Gemini partnered with Genesis to offer customers an opportunity to earn an annual percentage yield of up to 7.4%.
To facilitate this, Gemini transferred customer funds to Genesis, which then loaned them out to entities such as Three Arrows Capital. CoinDesk, another DCG subsidiary, operates similarly to Genesis.
The lawsuit claims that Genesis, in collaboration with the defendants, deceived Gemini’s lenders by falsely promoting robust risk management practices and a thorough vetting process for counterparties.
It alleges that Silbert, despite being aware of Genesis’ substantial insolvency, encouraged Gemini to continue its Earn program and took steps to conceal Genesis’ billion-dollar deficit. Genesis eventually filed for bankruptcy in January 2023.
The lawsuit also challenges DCG’s assertion that it absorbed the losses from Three Arrows Capital, stating it to be false. Additionally, the filing alleges that Genesis has not honored redemption requests since mid-November.
Cameron Winklevoss, co-founder of Gemini, made a tweet about the lawsuit, referring to Silbert as “the architect and mastermind of the DCG and Genesis fraud against creditors.” The lawsuit, which alleges fraud and aiding and abetting fraud, seeks damages, attorney’s fees, and any other appropriate relief.
DCG responded to the allegations on Twitter, stating that they were defamatory and labeling the filing a “publicity stunt.” They claimed that their senior leadership had been actively negotiating with creditor committees, contrasting it with what they characterized as the absence or mere press statements from Gemini’s leadership.
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