Cameron and Tyler Winklevoss, the Co-Founders of Gemini, are under scrutiny over an alleged secret withdrawal of $282 million from the now-bankrupt crypto lender, Genesis. This withdrawal occurred just months before the entire crypto firm collapsed, according to a report by the New York Post.
Cameron and Tyler Winklevoss have been grappling with a series of setbacks in recent times, including layoffs and plummeting trading volumes at Gemini. However, the focus changed when over $900 million in Gemini customer deposits were frozen due to the collapse of Genesis, the crypto lending platform that facilitated Gemini Earn, an interest-bearing program.
Gemini's Crypto Drama Unfolds
The Winklevoss twins' decision to withdraw millions of funds from Genesis has raised concerns about whether these funds were corporate assets or part of their personal crypto holdings. However, the withdrawn sum did not include any customer funds.
Internal documents revealed that this sizable withdrawal comprised a mix of cryptocurrencies, including Bitcoin, Ethereum, Gemini's stablecoin, Dogecoin, and more. The timing of the move, mere months before the suspension of customer withdrawals by Genesis, hints they knew it might happen and potentially undermine their claims of innocence, The Post reported.
In response, Gemini has criticized the New York Post's report, terming it as "misleading".
The exchange said on X (formerly Twitter): "The $282 million that was withdrawn from Genesis in August 2022 was in fact Earn users’ money. It was not Gemini corporate funds and it was not the personal funds of our Founders @cameron and @tyler or their investment firm @winklevosscap."
We are disappointed that the @nypost has chosen to recklessly publish a completely misleading story about the Gemini Earn program. Everything the Post alleges in its story is the exact opposite. The $282 million that was withdrawn from Genesis in August 2022 was in fact Earn…
— GeminiTrustCo (@GeminiTrustCo) September 28, 2023
Winklevoss sued DCG, the parent company of Genesis, and its CEO, Silbert, for allegedly providing misleading information about Genesis's financial health. The lawsuit stated that DCG offered a promissory note instead of the promised financial backing. Despite their efforts to exit the Gemini Earn partnership, the Winklevoss twins claim that Silbert convinced them otherwise during a face-to-face meeting.
Recently, Genesis Global Trading, a subsidiary of Genesis Global, announced the imminent closure of its US-focused spot crypto trading operations, set to take effect by the end of this month. Besides that, Genesis Global Trading announced plans to cease the operations of its over-the-counter trading platform . However, another trading-focused entity affiliated with Genesis, Genesis Global Capital International Limited (GGC), is expected to continue GGT's spot and derivatives trading services.
FTX Settlement and Ongoing Legal Clash
Genesis' troubles are traced back to a dispute with the now-bankrupt cryptocurrency exchange FTX. FTX had asserted that Genesis owed a staggering $2 billion but recently settled for a payment of $175 million to Alameda Research, its affiliated crypto hedge fund. This settlement provided the possibility of substantial recoveries for unsecured creditors, ranging from 70% to 90% in USD equivalent.
Adding to the complexity of Genesis' financial woes is an ongoing legal dispute with Gemini. Gemini has accused DCG and its CEO, Barry Silbert, of involvement in "encouraging and facilitating" fraudulent activity through Genesis. In response, DCG has denied these allegations, labeling them as baseless and defamatory, characterizing the lawsuit as a "publicity stunt."
Genesis found itself in financial turmoil after filing for bankruptcy protection in New York due to the collapse of Three Arrows Capital (3AC) and FTX. The Ad Hoc Group reported Genesis' exposure to 3AC at $2.3 billion, subsequently reduced to $1.2 billion after collateral liquidation.
Earlier this year, the SEC sued Gemini and Genesis, contending that Gemini Earn violated regulations by offering unregistered securities. However, in a court document filed on August 18, Gemini has dismissed the allegations on the basis that the SEC is unable to define the nature of the alleged unregistered security clearly.
