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The first trading day of 2023 is upon investors. With this new slate, many are hoping to see lots of improvement over 2022’s shaky market conditions. Crypto investors are already seeing more turmoil between projects, however — recent Gemini crypto news proves as much. The Winklevoss twin-led crypto exchange appears to be at its wits’ end with former partner Genesis, which owes millions to Gemini users that it can’t repay. This trouble has severe implications not only for Genesis, but also for parent company Digital Currency Group.
Gemini is in a bind with thousands of clients who used its Earn feature. The tool allowed investors to secure regular passive income for staking crypto on the exchange. Genesis, a crypto brokerage for institutional investors, partnered with Gemini to provide liquidity for the tool. However, shortly after the FTX bankruptcy crisis started unfolding and market values crashed, Genesis proved unable to meet the volume demands of investors rushing out of the program. Much like other exchanges, Genesis had to put a halt on trading as a result.
By December, Genesis was in a $900 million hole owed to Gemini Earn users. With little wiggle room, Genesis is rushing to uncover some capital. To do this, it’s relying on recovering money owed to it by parent company Digital Currency Group (DCG). However, DCG already has problems to juggle elsewhere; its other subsidiary, Grayscale, is fighting the U.S. Securities & Exchange Commission (SEC) in court and rapidly losing value to the crypto bear market.
Gemini has remained patient for the last 40-plus days of the asset freeze. However, it now appears to be done playing nice. So are the Gemini users who have been wronged by the freeze.
Gemini Crypto News: Co-Founder Pens Letter, Users File Suit Against Genesis
The first week of the new year for crypto is starting on a sour note with today’s Gemini crypto news. The exchange is now full-on warring against its former partner in order to make things right with users. What’s more, users themselves are following suit, with several banding together to file a legal claim against Genesis.
On Monday morning, Gemini co-founder Cameron Winklevoss posted an open letter to DCG CEO Barry Silbert on Twitter. In the letter, Winklevoss slams DCG for using “bad faith stall tactics” to avoid negotiating with Genesis and Gemini. The reason for Winklevoss’ attacks on DCG specifically have to do with the fact that Genesis is owed over $1.6 billion by its parent company — $900 million of which, Winklevoss asserts, belongs to Earn users.
The letter goes on to denounce DCG’s use of Genesis loans for “greedy share buybacks, illiquid venture investments” and the like. It closes out with a strict charge: come to the table with a solution by Jan. 8. Silbert has since responded to the letter by saying DCG did not borrow this money from Genesis. However, Winklevoss countered this stance by saying DCG still owes the amount regardless of whether it was borrowed or not because it has inked a promissory note for $1.1 billion with Genesis.
Legal troubles are simultaneously mounting for Genesis, too. The company faces a new class-action filing from three Gemini Earn users. These users’ complaints originate with the $1.1 billion promissory note. They say that this “sham transaction” was a move by DCG and Genesis to cover up the latter’s insolvency.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.