Winklevoss Alleges Accounting Fraud on DCG and Wants CEO Barry Silbert to Step Down

On Tuesday, January 10, Gemini co-founder Cameron Winklevoss published an open letter addressing the Digital currency Group (DCG) and lashing out at the crypto conglomerate over allegations of serious wrong doings.

He accused Digital currency Group and its subsidiary crypto broker Genesis of committing fraud. Winklevoss noted that DCG orchestrated a “campaign of lies” in order to deceive crypto exchange Gemini and users of its Earn products.

In his letter, Winklevoss called on DCG chief executive Barry Silbert to address liquidity issues between Gemini and Genesis Global. As we know, Genesis was one of the primary partners of Gemini’s Earn service, and allowed users to earn 8% interest on their crypto deposits. However, following the FTX collapse, Genesis announced the suspension of withdrawals leaving Gemini with more than $900 million in frozen funds.

In his recent letter, Winklevoss has accused Genesis of lending recklessly to now-bankrupt crypto hedge fund Three Arrows Capital. In the letter, Winklevoss noted that Genesis used the money for a “kamikaze” trade wherein 3AC swapped BTC for shares in the Grayscale Bitcoin Trust (GBTC).

Winklevoss alleges that DCG CEO Barry Silbert allowed these transactions to continue to stop GBTC shares from being sold in the open market, thereby protecting its share price. In the letter, Winklevoss writes: "They did so in an effort to mislead lenders into believing that DCG had absorbed massive losses that Genesis incurred from the Three Arrows Capital (3AC) collapse and induce lenders to continue making loans to Genesis. By lying, they hoped to buy time to dig themselves out of the hole they created”.

As a result, Winklevoss also demanded the stepping down of DCG CEO Barry Silbert noting that there’s “no path forward” until he remains the executive and that “he has proven himself unfit” to run the company. Winklevoss said that under the new management they would work together on a win-win situation for all.

The DCG Group has responded to the allegations calling them a “desperate and constructive publicity stunt” by Cameron. They added that by doing so, Cameron is trying to deflect blame from himself and Gemini “who are solely responsible for operating Gemini Earn and marketing the program to its customers”.

Furthermore, DCG CEO Barry Silbert also wrote a letter to its investors clarifying of the recent developments. In the letter, Silbert explained that the $1.1 billion promissory note issued by Genesis will be due in 2032 and is not callable. Thus, DCG won’t need to immediately pay the amount if at all Genesis slips into bankruptcy.

Furthermore, he said that DCG has no role to play in the restructuring of Genesis. "Because of the outstanding loans and the promissory note that DCG owes to Genesis Capital, DCG executives, including those on the Genesis board, have no decision-making authority related to any restructuring of Genesis Capital,” added Silbert.