Cameron Winklevoss Accuses DCG's Barry Silbert of Fraud, and Calls for Him to Step Down
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Cameron Winklevoss Accuses DCG's Barry Silbert of Fraud, and Calls for Him to Step Down

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Gemini's co-founder demanded Digital Currency Group's board fire CEO Barry Silbert and repay his customers $900 million. Silbert called the allegations "baseless and false."

Cameron Winklevoss Accuses DCG's Barry Silbert of Fraud, and Calls for Him to Step Down

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In his second angry open letter in 10 days, Gemini exchange co-founder Cameron Winklevoss upped his rhetoric — accusing Digital Currency Group CEO Barry Silbert of outright fraud.

Back on Jan. 2, Winklevoss had accused Silbert of "engaging in bad faith stall tactics" over the decision of DCG's crypto lending division, Genesis, to freeze $900 million in deposits belonging to 340,000 Gemini customers.

Gemini had partnered with Genesis on its Gemini Earn crypto yield accounts — relying on Genesis to provide the actual lending and borrowing services that generated up to 8% interest on deposits.

Like many other lenders, Genesis had loaned billions to crypto hedge fund Three Arrows Capital, which collapsed in June. That set off a domino effect that caused a number of big brands — including Voyager Digital and BlockFi — to fall into bankruptcy.

On Jan. 10, Winklevoss tweeted an open letter to the DCG board accusing Silbert of overseeing a deliberate campaign to make bad loans on Genesis' balance sheet look good and lying about injecting more than $1 billion into its lending division to shore up its finances after the 3AC collapse.

Through these lies, Silbert caused "the Genesis balance sheet [to] appear healthier than it actually was, fraudulently inducing lenders to continue making loans," Winklevoss alleged. He added that following the 3AC collapse:

"Instead of stepping up to solve this self-created problem, and despite having earned more than a billion dollars in fees — all at the expense of Genesis lenders — Barry refused to take responsibility. Instead, he resorted to committing fraud to protect his ill-gotten gains ... there is no path forward as long as Barry Silbert remains CEO of DCG."

Winklevoss then threatened to sue, adding that he is "confident that with new management at DCG, we can all work together to achieve a positive, out-of-court solution that will provide a win-win outcome for all, including DCG shareholders."

Time Runs Out

In the meantime, Gemini stepped up the pressure in another way on Tuesday — announcing that it had terminated its 340,000 Genesis Earn customers' Master Loan Agreement with Genesis, effective Jan. 8. Gemini said:

"This officially terminates the Earn program and requires Genesis to return all assets outstanding in the program. Existing redemption requests are not impacted and continue to await fulfillment by Genesis."

In his earlier open letter, Winklevoss had listed Jan. 8 as its deadline for Genesis to begin direct negotiations. He said:

"For the final time, we are asking you to publicly commit to working together to solve this problem by Jan. 8th, 2023. We remain ready and willing to work with you, but time is running out."

A Difficult Year

Silbert, meanwhile, responded — without specifically mentioning Winklevoss or Gemini — via his Twitter account with a DCG shareholders' letter on Tuesday.

Calling 2022 the most difficult year of his life, personally and professionally, he said:

"Bad actors and repeated blow-ups have wreaked havoc on our industry, with ripple effects extending far and wide. Although DCG, our subsidiaries, and many of our portfolio companies are not immune to the effects of the present turmoil, 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."

In a 19-part Q&A at the end of the letter, Silbert addresses the details of Winklevoss's allegations about the relationship between DCG and Genesis, the nature of its $1.1 billion support for Genesis, and its relationship with Three Arrows Capital.

He also said he had "no knowledge of or reason to believe" that federal prosecutors in New York are investigating the firm, as Bloomberg reported. Silbert added:
"I hope this letter and the accompanying Q&A that explains other developments and addresses some of the speculation about DCG — some of which is reasonable and some that is completely baseless and false — help to clarify our position."

Photo by Noam Galai/Getty Images for TechCrunch.

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