Gemini co-founder Cameron Winklevoss, in another open letter, urged Digital Currency Group (DCG) chief Barry Silbert to resign over the $900 million outstanding debt linked to the Earn lending program.
Earn Update: An Open Letter to the Board of @DCGco pic.twitter.com/eakuFjDZR2
— Cameron Winklevoss (@cameron) January 10, 2023
“I am writing to inform you that Gemini and more than 340,000 Earn users were misled by Genesis Global Capital LLC and its parent company Digital Currency Group,” the document says.
In Winklevoss’s view, Silbert-led entities misled the public about their financial condition and solvency.
In the published week-ago previous letter suspected the head of DCG of employing “unfair dragging-out tactics” for repaying the debt to users. He also urged Silbert to commit to resolving the issue by January 8.
The Earn lending product offered investors yields of up to 8% per year on deposits. In mid-November, Gemini paused payments on the program. This occurred amid financial problems at the primary partner—the OTC platform Genesis Global Capital.
According to media reports, the firm and its parent structure DCG owed $900 million to the exchange’s clients.
In the latest letter, the Gemini co-founder stressed that Genesis was prepared to lend funds to the bankrupt hedge fund Three Arrows Capital (3AC). The latter allegedly used these funds for kamikaze operations with Grayscale’s net asset value.
Winklevoss describes the process as a “recursive deal that inflated the AUM of the Grayscale Bitcoin Trust (GBTC), and, as a result, the sponsor’s fee income, Grayscale Investments,” a DCG subsidiary.
“3AC was a mule, moving assets between parties. As a result, Genesis took on enormous risk,” added Winklevoss.
He noted that Genesis’s losses from dealings with Three Arrows Capital amounted to $1.2 billion.
In December, investors filed a collective lawsuit against Gemini and its founders Tyler and Cameron Winklevoss for selling unregistered securities in the form of Earn interest accounts.
According to Bloomberg, in January the SEC and the U.S. Department of Justice began examining the nature of DCG’s dealings with its subsidiary OTC platform Genesis Global Capital.
This month, DCG announced the closure of its asset-management subsidiary HQ Digital.
Despite the mounting problems at Barry Silbert’s company, on January 9 the GBTC price jumped 12%. The discount to NAV narrowed from a record 49% to 44%.
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