Gemini’s Founders Face Scrutiny over $280M Crypto Withdrawal amid Genesis Crisis

Gemini’s Founders Face Scrutiny over $280M Crypto Withdrawal amid Genesis Crisis

Cameron and Tyler Winklevoss, the Co-Founders of Gemini, are under scrutiny over an alleged
secret withdrawal of $282 million from the now-bankrupt crypto lender, Genesis.
This withdrawal occurred just months before the entire crypto firm collapsed,
according to a report by the New York Post.

Cameron and Tyler Winklevoss have been grappling with a
series of setbacks in recent times, including layoffs and plummeting trading
volumes at Gemini. However, the focus changed when over $900 million in Gemini
customer deposits were frozen due to the collapse of Genesis, the crypto
lending platform that facilitated Gemini Earn, an interest-bearing program.

Gemini’s Crypto Drama Unfolds

The Winklevoss twins’ decision to withdraw millions of funds
from Genesis has raised concerns about whether these funds were corporate
assets or part of their personal crypto holdings. However, the withdrawn sum
did not include any customer funds.

Internal documents revealed that this sizable withdrawal
comprised a mix of cryptocurrencies, including Bitcoin, Ethereum, Gemini’s
stablecoin, Dogecoin, and more. The timing of the move, mere months before the
suspension of customer withdrawals by Genesis, hints they knew it might happen
and potentially undermine their claims of innocence, The Post reported.

In response, Gemini has criticized the New York Post’s report,
terming it as „misleading”.

The exchange said on X (formerly Twitter): „The
$282 million that was withdrawn from Genesis in August 2022 was in fact Earn
users’ money. It was not Gemini corporate funds and it was not the personal
funds of our Founders @cameron and @tyler or their investment firm @winklevosscap.”

Winklevoss sued DCG, the parent company of Genesis, and its
CEO, Silbert, for allegedly providing misleading information about Genesis’s financial
health. The lawsuit stated that DCG offered a promissory note instead of the
promised financial backing. Despite their efforts to exit the Gemini Earn
partnership, the Winklevoss twins claim that Silbert convinced them otherwise during
a face-to-face meeting.

Recently, Genesis Global Trading, a subsidiary of Genesis
Global, announced the imminent closure of its US-focused spot crypto trading operations, set to take effect by the end of this month. Besides that, Genesis
Global Trading announced plans to cease the operations of its over-the-counter
trading platform. However, another trading-focused entity affiliated with
Genesis, Genesis Global Capital International Limited (GGC), is expected to
continue GGT’s spot and derivatives trading services.

FTX Settlement and Ongoing Legal Clash

Genesis’ troubles are traced back to a dispute with the
now-bankrupt cryptocurrency exchange FTX. FTX had asserted that Genesis owed a
staggering $2 billion but recently settled for a payment of $175 million to
Alameda Research, its affiliated crypto hedge fund. This settlement provided
the possibility of substantial recoveries for unsecured creditors, ranging from
70% to 90% in USD equivalent.

Adding to the complexity of Genesis’ financial woes is an
ongoing legal dispute with Gemini. Gemini has accused DCG and its CEO, Barry
Silbert, of involvement in „encouraging and facilitating” fraudulent
activity through Genesis. In response, DCG has denied these
allegations, labeling them as baseless and defamatory, characterizing the
lawsuit as a „publicity stunt.”

Genesis found itself in financial turmoil after filing for
bankruptcy protection in New York due to the collapse of Three Arrows Capital
(3AC) and FTX. The Ad Hoc Group reported Genesis’ exposure to 3AC at $2.3
billion, subsequently reduced to $1.2 billion after collateral liquidation.

Earlier this year, the SEC sued Gemini and Genesis, contending
that Gemini Earn violated regulations by offering unregistered securities.
However, in a court document filed on August 18, Gemini has dismissed the
allegations on the basis that the SEC is unable to define the nature of the
alleged unregistered security clearly.

This article was written by Jared Kirui at www.financemagnates.com.

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