The fallout from the collapse of Sam Bankman-Fried’s crypto empire just got messier, with digital-asset entrepreneur Cameron Winklevoss accusing fellow businessman Barry Silbert of “bad faith stall tactics” and the intermingling of funds within his conglomerate that Winklevoss says have left $900 million in customer assets needlessly in limbo since FTX’s meltdown.
(Bloomberg) — The fallout from the collapse of Sam Bankman-Fried’s crypto empire just got messier, with digital-asset entrepreneur Cameron Winklevoss accusing fellow businessman Barry Silbert of “bad faith stall tactics” and the intermingling of funds within his conglomerate that Winklevoss says have left $900 million in customer assets needlessly in limbo since FTX’s meltdown.
Gemini Trust Co., founded by Winklevoss and his twin brother, paused redemptions on a lending product called Earn, which offered investors the potential to generate as much as 8% in interest on their digital coins. It did so by lending them out to Genesis Global Capital, one of the companies owned by Silbert’s Digital Currency Group.
The Earn halt came in November after Genesis suspended both redemptions and new loan originations at its lending unit because of its exposure to FTX. Genesis has told clients that it could take “weeks” to find a path forward, and that bankruptcy may be one possibility.
Winklevoss, facing pressure of his own from angry customers locked out of their Gemini accounts and a lawsuit alleging fraud, in an open letter Monday said he had provided Silbert with multiple proposals to resolve the issue, including as recently as Dec. 25. He told Silbert “this mess is entirely of your own making,” citing some $1.675 billion owed to Genesis by DCG, which it used for other business purposes within Silbert’s conglomerate. “This is money that Genesis owes to Earn users and other creditors.”
Read more:Gemini, Winklevoss Twins Sued for Fraud Over Earn Accounts
“It’s not lost on us that you’ve been working desperately to try and firewall DCG from the problems that you created at Genesis,” Winklevoss wrote. “You should dispense with this fiction because we all know what you know — that DCG and Genesis are beyond commingled.”
Read more: Genesis Balance Sheet Reveals Web of Loans Across Silbert Empire
Silbert in a tweeted response refuted several accusations in Wilkevoss’s letter, saying “DCG did not borrow $1.675 billion from Genesis” and “never missed an interest payment to Genesis and is current on all loans outstanding,” without providing more detail. Silbert also claimed DCG delivered a proposal for resolving the dispute to Genesis and Winklevoss’s advisers on Dec. 29, but had received no reply.
For his part, Winklevoss asked Silbert to “publicly commit to working together to solve this problem,” which he says affects more than 340,000 Earn customers, by Jan. 8. He didn’t say what would happen if no agreement was reached by then.
The dispute is the latest example of how the recent crises in crypto are fraying the ties that have long existed among the top tier of the crypto industry, transforming a “we’re all going to make it” vibe into one centered on every firm for itself. It also highlights the web of interconnections among the biggest digital-asset firms and their affiliates.
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Winklevoss claims the $1.675 billion borrowed by DCG from Genesis was used “to fuel greedy share buybacks, illiquid venture investments, and kamikaze Grayscale NAV trades,” referring to another of Silbert’s businesses, Grayscale Investments, whose largest vehicle is the Grayscale Bitcoin Trust. This came, he said, “all at the expense of creditors and all for your own personal gain.”
In statements and tweets, DCG has been trying to emphasize that it’s separate from Genesis and insulated from its troubles. After Genesis suspended redemptions, DCG said in a tweet that “this temporary action has no impact on the business operations of DCG and our other wholly owned subsidiaries.”
Silbert, in a letter to shareholders in November, said that intercompany loans were made “in the ordinary course of business.” He noted that DCG has a liability of $575 million to Genesis. In the letter, he also described a $1.1 billion promissory note, due June 2032, which he said came about as the parent company stepped in to assume liabilities from Genesis related to the collapse of digital-assets hedge fund Three Arrows Capital.
Winklevoss’s aggressive stance comes as Gemini and its founders faces a lawsuit from investors who accuse the companuy of fraud, claiming the Earn product was in effect an interest-bearing account that it failed to register as a security.
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(Adds background on DCG relationship with Genesis, more from Winklevoss letter.)
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