Gemini sues DCG in latest effort to recover funds for Earn customers
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Gemini sued Digital Currency Group and its chief Barry Silbert Friday, escalating claims of unpaid debts and alleged fraud.
Why it matters: Customers in Gemini's Earn program have been stuck in limbo since November, when the crypto exchange halted withdrawals as a result of its lending partner Genesis, a DCG unit, hitting the skids.
Catch up fast: Cameron Winklevoss, Gemini's co-founder, set an ultimatum days before the suit — extending "best and final" terms for a deal which laid out a plan for DCG to pay back funds owed to Gemini's Earn customers.
State of play: Gemini's lawsuit landed July 7, after the deadline passed without an agreement, seeking to recover losses and damages it says are a result of DCG and Silbert misrepresenting Genesis' financial standing.
- The complaint alleges that DCG and Silbert "engaged in a fraudulent scheme to induce a variety of depositors."
- Between the lines: Winklevoss is claiming that DCG and Silbert obfuscated the financial health of Genesis and accepted depositors' money while insolvent.
The other side: DCG on Friday responded to the lawsuit in a tweeted statement saying it was "defamatory" and "completely false."
Zoom in: Gemini's complaint points to a snapshot of Genesis' balance sheet that treats the infamous $1.1 billion 10-year intercompany promissory note between DCG and Genesis as a "current asset."
- The crypto exchange claims emailed communiques from Genesis show how Gemini was misled.
What others are saying: The allegations in the Winklevoss suit, if proven true, would point to "striking similarities" to Enron, Ram Ahluwalia, CEO and co-founder of Lumida Wealth Management, observed in an 18-part Twitter thread.
- "Enron employed creative accounting to hide its debt and inflate profits, leading to its bankruptcy in 2001," he said.
Yes, but: Even if the allegations in the Winklevoss suit ultimately proved a case of fraud, Gemini would still need to show in discovery that DCG and Silbert directed Genesis, Ahluwalia noted.
Quick take: Genesis' bankruptcy proceeding was supposed to be a quick one, but it looks like it will take much longer than initially quoted.
