Inside DCG, the crypto conglomerate led by billionaire Barry Silbert that's come under fire from the Winklevoss twins
- Gemini cofounder Cameron Winklevoss blasted Digital Currency Group CEO Barry Silbert for "bad faith" tactics in an open letter.
- Both executives' respective companies have locked horns over a business disagreement, where Winklevoss alleges that DCG owes Gemini nearly $1 billion.
In what some have called an "industry soap opera," two of the most influential cryptocurrency executives are duking it out with nearly $1 billion in customer funds at stake.
Gemini cofounder Cameron Winklevoss blasted Digital Currency Group (DCG) founder and CEO Barry Silbert in a public letter on Monday, accusing the billionaire of "bad faith" business practices. DCG is the conglomerate behind industry giants like asset management firm Grayscale Investments, crypto trade publication Coindesk, and digital asset brokerage Genesis Global Capital.
Winklevoss says that DCG and Genesis owe the crypto exchange and its customers $900 million. He gave Silbert until January 8 to commit to resolving the issue.
"Every time we ask you for tangible engagement, you hide behind lawyers, investment bankers and process. After six weeks, your behavior is not only completely unacceptable, it is unconscionable," Winklevoss wrote. "The idea in your head that you can quietly hide in your ivory tower and that this will all just magically go away, or that this is someone else's problem, is pure fantasy."
Winklevoss also claimed Silbert borrowed $1.67 billion from his own Genesis subsidiary for share buybacks, venture investments, and "kamikaze Grayscale NAV trades" that inflated fee-generating assets under management.
In response, Silbert took to Twitter to refute Winklevoss's claims: "DCG did not borrow $1.675 billion from Genesis DCG has never missed an interest payment to Genesis and is current on all loans outstanding; next loan maturity is May 2023 DCG delivered to Genesis and your advisors a proposal on December 29th and has not received any response."
Tegan Kline, Chief Business Officer and cofounder of Web3 startup Edge & Node, told Insider that both firms bear responsibility in the situation.
"Gemini got their users into this situation and DCG and Genesis lending seem to have over-leveraged themselves," Kline said.
How did DCG, Genesis and Gemini get wrapped up in the alleged debt-based scandal?
Gemini, which was cofounded by Winklevoss and his identical twin Tyler, paused redemptions on the firm's lending product called Earn a week after crypto exchange FTX filed for bankruptcy protection in November. The offering gave customers the chance to earn as much as 8% interest on their crypto by lending those digital assets out to DCG's Genesis.
But Genesis got caught up in FTX's downfall, with its derivatives business having $175 million of locked funds on Sam Bankman-Fried's now-insolvent platform.
The implosion of FTX triggered an influx of withdrawal requests for Genesis. As a result, the firm suspended new loan originations and redemptions because of its FTX exposure. This impacted Gemini Earn users because customers lent out their digital tokens to DCG's Genesis for the yields.
The Winklevoss letter comes as investors are are suing the twins and their firm over the interest-bearing product. A complaint filed on December 27 said Gemini refused to honor investor redemptions, wiping out investors who still had holdings, as Genesis was unable to return the crypto it borrowed from Gemini Earn investors.
A group of Gemini investors are also accusing the firm of fraud and securities law violations.
Andrei Grachev, Managing Partner at digital asset market maker DWF Labs, told Insider that Genesis has been a concern for some time.
"While the collapse may not have a major impact on the industry as a whole, it marks the end of an era as DCG, long feared to be the final domino to fall, will finally succumb," he said.