Cameron Winklevoss asks DCG board to remove CEO Barry Silbert, escalating dispute
An ongoing spat between crypto exchange Gemini co-founder and President Cameron Winklevoss and Digital Currency Group (DCG) CEO Barry Silbert continued to heat up Tuesday morning, after Winklevoss alleged Silbert and others at the company "conspired to make false statements and misrepresentations to Gemini" in an open letter to the company.
"There is no path forward as long as Barry Silbert remains CEO of DCG," Winklevoss said.
"Gemini, acting on behalf of 340,000 Earn users, requests that the board remove Barry Silbert as CEO, effective immediately and install a new CEO, who will right the wrongs that occurred under Barry’s watch."
Genesis’ lending division Genesis Global Capital paused loan originations and withdrawals days after FTX filed for bankruptcy, with Genesis interim CEO Derar Islam telling clients "abnormal withdrawal requests" had "exceeded our current liquidity."
The decision put Gemini’s Earn product on ice, leaving hundreds of thousands of the New York based crypto exchange’s customers unable to access approximately $900 million in crypto deposits.
Gemini has since hired legal and financial advisors for the matter and formed a major creditors committee, though Genesis hasn’t yet filed bankruptcy.
The executive dispute — and ultimately DCG’s culpability in Genesis’ financial troubles — hinges on the terms of a crucial $1.1 billion promissory note paid to Genesis by DCG in light of losses including the default, and subsequent bankruptcy, of major Genesis borrower, hedge fund Three Arrows Capital (3AC).
In early July, Genesis’ former CEO Michael Moro announced DCG had "assumed certain liabilities" in light of Genesis’ hefty $1.2 billion in losses from 3AC.
By Winklevoss’ allegations, "DCG had not ensured that Genesis had the capital to operate." Winklevoss called this note, which carries an interest rate of 1% and is due in 2032, a "complete gimmick."
Moreover, Winklevoss went on to cite Genesis’ former head of lending and trading, Matthew Ballensweig, as having communicated internally to Genesis employees responsible for managing Gemini’s earn program that 3AC-related losses were, "predominantly absorbed by and netted against DCG’s balance sheet, leaving Genesis with adequate capitalization to continue."
Gemini also alleged that Genesis “mischaracterized” its financial record keeping by claiming the promissory note as a $1.1 billion asset; Gemini argued the current value of the long-dated note should reflect an approximate 70% discount.
"This is another desperate and unconstructive publicity stunt from [Cameron Winklevoss] to deflect blame from himself and Gemini," DCG replied hours later over Twitter. "We are preserving all legal remedies in response to these malicious, fake, and defamatory attacks."
Following three weeks with little in the way of updates on the situation, Winklevoss and Silbert traded words a week ago on Jan. 2 after the Gemini head published a similar open letter to Silbert.
In that first letter, Winklevoss demanded that Silbert, as CEO of DCG, Genesis’ parent company, “publicly commit” to working with Gemini to solve the problem for its Earn customers. The letter went on to accuse Silbert of “engaging in bad faith stall tactics” and claiming DCG’s culpability by accusing it of owing Genesis $1.6 billion in loans.
Denying the alleged loan amount, Silbert, who owns a 40% stake in DCG as of its November 2021 capital raise, responded only to acknowledge DCG owes Genesis $575 million in loans due this May. DCG also serves as parent company to major crypto asset manager Grayscale, bitcoin mining player Foundry, and media outlet Coindesk.
Late last week, Bloomberg reported DCG is facing an investigation by the US Attorney’s Office for the Eastern District of New York for internal transfers between DCG and Genesis that began prior to FTX's collapse.
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