A week for a billion dollars

Since the payment stop on the lending platform, Genesis and the parent company DCG have been in negotiations with the Gemini boss to “restructure” the debt. Gemini is trying to collect (preferably in full) the customer funds from its Earn program that are parked on Genesis.

Recently, the interim CEO of Genesis, Derar Islam, came forward to word. Although one is “continuing to try to proceed as quickly as possible”, it needs more time due to the complexity of the process, it says. However, Genesis continues to strive for the “best possible result for affected customers”.

According to Winkelvoss, however, the man behind Genesis and DCG, Barry Silbert, is anything but cooperative. He accused him of “malicious delaying tactics” in the negotiations. From cheap appeasement to “unscrupulous behavior” was the speech. Winkelvoss also believes that DCG and Genesis are involved beyond the official relationship.

DCG reportedly owes its own subsidiary approximately $1.7 billion, which includes said debt to Gemini. According to Winkelvoss, Silbert “took money from school teachers” and other honorable citizens in order to initiate “greedy share buybacks, illiquid venture investments and kamikaze trades”.

silvert denied the allegations on Twitter. According to him, there is no credit from DCG to Genesis, nor is he late in responding. On the contrary: he claims to have already submitted a proposal for the repayment on December 29th. There is still no response, he says. Apparently Winkelvoss has heard enough. Silbert’s behavior was simply “dishonest”.

Class action lawsuit coming?

So far, Gemini has been cautiously optimistic and officially only suspects temporary liquidity bottlenecks at DCG and Genesis. If it is “only” a cash flow insolvency, it would be “completely possible to secure the assets of all Earn customers,” says in updates to the program. Of course, you are still warned of possible losses. A de facto insolvency cannot be ruled out, but there are currently “no indications” of this.

Some Gemini customers see things differently. They submitted one back on December 31st Collective Request for Out-of-Court Arbitration against DCG and Genesis. The allegations: Genesis is said to have covered up its own insolvency with the help of “sham transactions” by its parent company. And that was already at the time of the Three Arrows Capital collapse (3AC) in the summer of 2022. Genesis had already badly burned their fingers on the crashing crypto hedge fund, they say.

The 3AC founder, Zhu Su, even goes one step further. He accuses DCG of dealing behind closed doors with FTX and being close to Sam Bankman-Fried. DCG and FTX would have “conspired” for the LUNA collapse and benefited from it, but suffered massive losses in the subsequent bankruptcy of 3AC.

Instead of then “switching” in the summer, said bogus transactions were fabricated to “magically plug holes,” according to Su. According to him, DCG is therefore insolvent and a “criminal fraud”.

Zhu Su’s credibility is undecided. It is clear that DCG and Genesis are increasingly in need of explanation. However, Silbert continues to remain undercover and, if he does, then only speaks out to largely rule out DCG’s own involvement in Genesis’ business. Or hide “behind investment bankers and lawyers” in his “tower of ivory”, according to Winkelvoss.

Meanwhile, the Gemini founder has been plagued by a lawsuit and allegations of fraud from its own customers for some time. So the pressure is there to get results as soon as possible – with or without Silbert’s cooperation. His and probably the patience of many now at least has an expiry date.