Crypto exchange Gemini filed a lawsuit against Digital Currency Group and its CEO Barry Silbert over allegations of deceiving investors into lending crypto and fiat assets to Genesis.
In its court filing, the exchange referenced the Gemini Earn Program, an investment product released as a joint venture of Gemini and DCG’s subsidiary firm Genesis. Under the terms of the program, Genesis would lend the funds deposited by Gemini investors to counterparties. Genesis would then issue loans to counterparties at higher interest rates than what it paid to creditors and keep the difference as profit.
However, Gemini claimed that Genesis instead lent these assets to 3AC which, in turn, used them to fund a risky arbitrage trading strategy. By July 2022, Genesis had lost $1.2B on loans to 3AC, rendering it insolvent by “hundreds of millions of dollars.”
Gemini further alleged that DCG and Barry Silbert misled investors by lying that DCG had stepped in to absorb the losses incurred by Genesis. After the collapse of FTX in November 2022, Genesis suspended withdrawals on the Gemini Earn Program due to its inability to pay obligations to creditors and filed for bankruptcy in January 2023.
Gemini stated that DCG's fraudulent actions have led to several investors filing claims against the exchange. In its words,
“This proceeding seeks to hold Defendants accountable for their repeated lies to Gemini, and for the consequences of their unlawful scheme with Genesis.”
In response, DCG called the lawsuit a publicity stunt. Citing that the accusations of fraud against the firm were defamatory, it added,
“From day one, DCG has remained committed to reaching an amicable solution for all parties to the Genesis bankruptcy.”
Written by
Ayush Pande
Ayush Pande is a hardware, gaming, and crypto writer based in India. He's a tech enthusiast who's fascinated by the potential of blockchain technology.
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