DCG seeks to end Gemini Trust fraud case

In a filing in federal court in Manhattan, DCG and its founder, Barry Silbert, called Gemini’s lawsuit part of a public relations campaign to “deflect blame” for losses incurred by Gemini Earn customers

Digital Currency Group on Thursday urged a U.S. judge to reject a lawsuit claiming it defrauded customers of Gemini Trust, which was founded by billionaire twins Tyler and Cameron Winklevoss, into lending money to its now-insolvent Genesis Global Capital unit.

In a filing in federal court in Manhattan, Digital Currency Group and its founder, Barry Silbert, called Gemini’s lawsuit part of a public relations campaign to “deflect blame” for losses incurred by hundreds of thousands of Gemini Earn customers.

Digital Currency Group and Silbert, who is also a defendant, called Gemini a “sophisticated market participant” that had told Gemini Earn customers, who were expecting high interest rates, that it had “thoroughly vetted” Genesis.

They also claimed to have had no legal obligation to correct alleged misstatements by Genesis.

That is not the law, and if it were, every parent would be liable for every public representation made by its subsidiary, Digital Currency Group and Silbert stated.

Gemini in a complaint filed on July 7 accused Digital Currency Group and Silbert of hiding a $1.1 billion balance sheet hole at Genesis that came up from the June 2022 collapse of the Three Arrows Capital (3AC) hedge fund.

Gemini said the defendants did this so that Gemini Earn customers would continue lending crypto assets to Genesis, believing it was “business as usual.”

The lawsuit seeks compensatory and punitive damages. It was moved last week from a state court in Manhattan.

Gemini and Genesis are defendants in a U.S. Securities and Exchange Commission civil lawsuit contending they bypassed disclosure requirements meant to safeguard investors in connection with Gemini Earn.

As per the Securities and Exchange Commission and the Winklevosses, Genesis held around $900 million of assets from nearly 340,000 Gemini Earn customers before stopping withdrawals last November.

The pause came after the failure of SBF’s FTX crypto currency exchange. SBF has pleaded not guilty to criminal fraud charges linked to FTX’s collapse.

Genesis filed for Chapter 11 protection in January. Gemini is its biggest creditor. Tyler and Cameron Winklevoss are each worth $1.5 billion, according to Forbes magazine.