Digital Currency Group is seeking to dismiss a fraud lawsuit by Gemini Trust, stemming from the bankruptcy of Genesis Global Capital.
On Thursday, the Digital Currency Group (DCG) asked a U.S. judge in Manhattan to throw out a lawsuit. The case was brought by Gemini Trust, a company led by billionaire twins Tyler and Cameron Winklevoss. The lawsuit claims that DCG tricked Gemini’s customers into lending money to its bankrupt unit, Genesis Global Capital.
Barry Silbert, the founder of DCG, along with his company, referred to the lawsuit as a move to shift blame. They believe Gemini is trying to divert attention from the losses of Gemini Earn’s many customers.
DCG and Silbert emphasized that Gemini, being a skilled market player, assured its customers of Genesis’s integrity. They also stated that they were not responsible for fixing any false information put out by Genesis. They stressed that if that were the case, every parent company would need to answer for its subsidiary’s statements.
Accusations and Legal Battles
Gemini filed a complaint on July 7, saying that DCG and Silbert hid a massive $1.1 billion shortfall in Genesis’s balance sheet. This shortfall appeared after Three Arrows Capital hedge fund’s collapse in June 2022. Gemini insists that DCG and Silbert did this so that customers would keep lending cryptocurrency to Genesis, thinking everything was normal.
The lawsuit is seeking both compensatory and punitive damages and was recently shifted to a federal court in Manhattan.
In a separate case, the U.S. Securities and Exchange Commission (SEC) is also taking legal action against Gemini and Genesis. The SEC accuses them of avoiding necessary disclosure rules that protect investors. This is tied to dealings with Gemini Earn.
The Financial Collapse and Legal Implications
Genesis had control of nearly $900 million of assets from about 340,000 Gemini Earn customers before stopping withdrawals last November.
This stoppage followed the failure of FTX, a cryptocurrency exchange run by Sam Bankman-Fried. He has since pleaded not guilty to fraud charges tied to the exchange’s downfall.
In January, Genesis applied for Chapter 11 protection. Gemini stands as its biggest creditor. The Winklevoss twins, each with a personal wealth of $1.5 billion as per Forbes, find themselves at the heart of a challenging legal dispute.