Gemini, the cryptocurrency exchange founded by the wealthy Winklevoss brothers, has filed a legal complaint against the Digital Currency Group (DCG) and its CEO and founder, Barry Silbert.

On July 7 on Twitter, Gemini’s Cameron Winklevoss accused DCG and its CEO, Barry Silbert, of fraud and deception. According to Winklevoss, DCG and Silbert were involved in a scheme to hide Genesis’ bankruptcy and deceive creditors. DCG is the parent company of Genesis.

Silbert Head ‘hole in Genesis’ balance sheet’

Cameron Winklevoss previously threatened to sue Silbert and DCG over repayment of a $900 million loan after Genesis filed for bankruptcy. Gemini had a close connection to Genesis, and led investors to the platform, through its Gemini Earn division.

In the complaint, Winklevoss alleged that when Gemini decided to end the Earn program in October 2022, Silbert contacted Gemini to persuade the exchange to continue the program. “Those who knew Genesis were significantly insolvent did,” Winklevoss said.

Genesis, the lender, operates the Gemini Exchange earning program, which offers depositors returns of up to 8%. Depositors entrusted their money to Genesis, which then lent it to interest Gemini customers.

In fact, Genesis had a huge financial hole stemming from the collapse of Three Arrows Capital (3AC). Instead of being honest about the losses, Genesis and DCG came up with a ruse, according to complaint.

DCG claimed that it had absorbed Genesis’ losses and provided a ten-year promissory note at a low interest rate. Genesis told its creditors and depositors that its parent company, DCG, had “absorbed” 3AC’s losses.

“It was a carefully crafted lie,” Winklevoss said. Twitter.

DCG, Genesis “conspired” against creditors

Gemini’s complaint alleges that the promissory note was an accounting trick. Designed to make it appear as though the distressed company has positive equity. And in doing so, Genesis seemed to be able to solvent without DCG actually having to shell out the cash.

Winklevoss alleged that Genesis and DCG conspired to make false financial reports, misrepresenting the value of the promissory note. They then allegedly concealed this from Gemini and other creditors. He also accused DCG executives, including Mark Murphy (then COO and current president), of being aware of the deception and of not correcting the false reports.

The complaint introduces several “rigged” balance sheets that apparently show DCG and Genesis trying to hide their financial plight. According to Winklevoss, this scam includes “direct participation” and collaboration from Barry Silbert, DCG, and Genesis.

DCG responded on Twitter within hours, calling the legal action “another publicity stunt… to deflect blame and liability.” The company denied any suggestion of wrongdoing and confirmed that it expects Genesis’s Chapter 11 bankruptcy proceedings to conclude soon.

In January, the Securities and Exchange Commission designated Genesis and Gemini a complaint Husband accused of offering and selling unregistered securities through the Gemini’s Earn program. In May, Gemini attempted to quash the complaint, arguing that it was outside the scope of the regulator.