Gemini Earn Users Reportedly File for Class-Action Arbitration Against Genesis and DCG
- Three Gemini Earn users have alleged that Genesis breached its master agreement between firm and client when it failed to disclose its insolvency last summer.
- The individuals also claimed that the company tried to hide its insolvency through a sham transaction with its parent company DCG.
Gemini founders Tyler Winklevoss (L) and Cameron Winklevoss (R) onstage during TechCrunch Disrupt, New York, May 6, 2015. Noam Galai/Getty Images for TechCrunch
Users of crypto exchange Gemini’s Earn program have reportedly filed a request for class-action arbitration against Genesis and Digital Currency Group (DCG) for their role in the suspension of Earn redemptions.
The three individuals have alleged that Genesis broke the terms of its Master Agreement between the firm and users when it failed to disclose its insolvency last summer, which eventually led to Gemini suspending its Earn redemption program after Genesis froze withdrawals in November. Seen as an alternative to class-action lawsuit, a class-action arbitration involves a third-party that resolves disputes between two sides, with the arbitrator’s decision being binding and can not be appealed.
The claimants also allege that Genesis not only stayed silent about their insolvency, but also tried to conceal it through a sham transaction with its parent company DCG. The right to collect a $2.3 billion debt owed to Genesis by Three Arrows Capital was exchanged for a $1.1 billion promisorry note from DCG that was due a decade later, in 2033. The individuals also claimed that through the Master Agreement, Genesis’ actions created unregistered sales of securities, and are now seeking to rescind the contract of sale and related damages.
Yesterday, Gemini co-founder Cameron Winklevoss posted an open letter on Twitter, accusing DCG’s head Barry Silbert of “bad faith stall tactics”, and seeking answers to why more than $900 million of his customers’ funds were still inaccessible. The Winklevoss twin also accused Silbert of using $1.675 billion from Genesis to help other DCG ventures instead of repaying creditors.
Silbert responded shortly after, defending his company by saying they never took such a loan from Genesis, and claiming that DCG had sent Genesis and Gemini a proposal to resolve these issues on 29 December but had still not received an answer.
- An investigation from the New York Attorney General’s office has allegedly found that Gemini was aware of Genesis’ weak financial position, but still lied to investors.
- The lawsuit is looking to ban DCG, Genesis, and Gemini from the New York financial industry, seek restitutions for investments, and the return of “ill-gotten gains”.
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- Bankrupt crypto lender Genesis is trying to recover around $500 million from DCG, and another 4,550.5 BTC from DCGI, which it had loaned to the two companies in 2022.
- Both DCG and DCGI requested that the debts were converted to open loans on 9 May, but Genesis declined both offers and demanded the repayment of the loans with interest.
- Cameron Winklevoss, co-founder of crypto exchange Gemini, proposed a plan that would see Digital Currency Group pay close to $1.5 billion over the next five years.
- The Winklevoss twin said that if the “final offer” is not accepted by the end of the week, Gemini would file a lawsuit against DCG and CEO Barry Silbert.