Tension between DCG and Gemini Intensifies as Their Managements Continue on Spats

The conflict between Digital Currency Group (DCG) and Gemini escalated after more rebukes against each other came from the managements of both parties. In response to the accusations from Cameron Winklevoss, co-founder of Gemini, DCG's CEO Barry Silbert wrote a letter to the company's shareholders to offer more details about DCG and Genesis (a subsidiary of DCG's).

DCG and Gemini have been arguing over the frozen funds of Gemini's Earn users for almost two months. Previously, Winklevoss asked Silbert to publicly commit to solving the problem by January 8th, but nothing happened on that day.

Yesterday, Winklevoss sent an open letter to the board of DCG, requesting to remove Barry Silbert as CEO and to install a new CEO. Winklevoss claimed Silbert had been telling lies, and "pretended" that DCG had filled the $1.2 billion hole in Genesis' $8 billion loan book left by Three Arrows Capital (3AC).

To respond, Silbert posted an open letter to DCG's shareholders. He said, "this past year has been the most difficult of my life – both personally and professionally. It has been challenging to have my integrity and good intentions questioned after spending a decade pouring everything into this company and the space with an unrelenting focus on doing things the right way."

Silbert then used a Q&A section to explain the questions about DCG and Genesis. "DCG does not direct any trades, loans, or borrows for Genesis' business." he said, before clarifying that DCG currently owes Genesis Capital, the lending arm of Genesis, $447.5 million and 4,550 $BTC, which matures in May 2023. Previously, Winklevoss said DCG borrowed $1.675 billion from Genesis.

Silbert stated that, in an effort to protect Genesis, DCG decided to take over the 3AC claim. It assigned and exchanged Genesis's unsecured loan receivable from 3AC with a $1.1 billion promissory note from DCG that matures in 2032. "DCG effectively assumed Genesis's risk of loss on the 3AC loan with no obligation to do so," Silbert said. According to Winklevoss, however, the support from DCG to Genesis was an "accounting fraud", as the promissory note was not current assets, and worth only around $300 million as of today.

The DCG CEO also explained the relationship between his company and some of the firms that collapsed in 2022, saying that DCG had never had a relationship with 3AC, Alameda or Celsius. DCG made a small equity investment of $250,000 in FTX's Series B in July 2021, and held a trading account with FTX with less than 1% of all its trading volume on the platform. Genesis, however, had a trading and lending relationship with both 3AC and Alameda.

In addition, Silbert denied that DCG commingled cash with its wholly-owned subsidiaries. Regarding the report that DCG was under investigation by the Eastern District of New York (EDNY), he said, "DCG has no knowledge of or reason to believe that there is an EDNY investigation into DCG."

Although Silbert didn't directly fire back at Winklevoss, the official DCG Twitter account used a tougher tone. The account commented under Gemini co-founder's open letter, saying, "this is another desperate and unconstructive publicity stunt from Cameron Winklevoss to deflect blame from himself and Gemini, who are solely responsible for operating Gemini Earn and marketing the program to its customers.

"We are preserving all legal remedies in response to these malicious, fake, and defamatory attacks. DCG will continue to engage in productive dialogue with Genesis and its creditors with the goal of arriving at a solution that works for all parties."

On the other side of the spectrum, Gemini took action to end the customer loan agreements with Genesis. "This officially terminates the Earn Program and requires Genesis to return all assets outstanding in the program," Gemini said in an email to customers.