Winklevoss twins sue crypto investor DCG after dispute over restructuring

Obtain free Cryptocurrencies updates

We’ll ship you a myFT Every day Digest e-mail rounding up the most recent Cryptocurrencies information each morning.

Billionaire twins Tyler and Cameron Winklevoss have sued SoftBank-backed crypto firm Digital Foreign money Group and its chief govt Barry Silbert, alleging that they engaged in “fraud” to trick traders.

The lawsuit, filed in a New York court docket on Friday, ramps up a months-long dispute between the previous Olympic rowers and DCG as each side attempt to include the fallout from the collapse of cryptocurrency change FTX.

DCG’s cryptocurrency dealer Genesis was pressured to place its lending unit into Chapter 11 chapter earlier this 12 months following the implosion of FTX, trapping traders’ funds.

DCG’s Genesis was one of many largest lenders within the crypto market, permitting prospects to lend out their cash in return for top yields. Genesis owes its collectors greater than $3bn, with $766mn owed to the retail prospects of the Winklevoss’s Gemini change, in accordance with chapter filings.

DCG, Genesis and Gemini have been in mediation by means of chapter court docket for months, however the Winklevoss twins have grown more and more strident of their criticism of Silbert and his crypto corporations.

On the coronary heart of Gemini’s allegations in opposition to DCG and Silbert is a $1.2bn promissory observe, which they declare was misrepresented to collectors to be able to cowl up DCG and Genesis’ monetary positions. “This lawsuit is about fraud,” the paperwork mentioned.

It alleged that DCG and Silbert “engaged in a fraudulent scheme” to induce Gemini’s prospects “to proceed to lend large quantities of cryptocurrency and US {dollars}” to Genesis, by touting “purportedly strong risk-management practices and a supposedly thorough vetting course of” of who the belongings have been lent to. “These have been lies,” the lawsuit claims. 

Gemini and Genesis had engaged in a crypto-lending programme referred to as Earn, the place retail traders would place their funds with Gemini which might lend them to Genesis, which might in flip lend the tokens out to different corporations. The chapter of Genesis has affected 340,000 of Gemini’s retail traders, whose funds stay trapped, in addition to 1000’s of different traders whose cash have been lent to the dealer.

With backing from SoftBank, Singapore’s sovereign wealth fund GIC and Google’s CapitalG, DCG has grown into one of many crypto market’s largest enterprise portfolios. The Connecticut-based group, valued at $10bn in 2021, owns corporations together with asset supervisor Grayscale and commerce information website CoinDesk.

“Any suggestion of wrongdoing by DCG or any of its workers is baseless, defamatory and utterly false,” DCG mentioned in response. “The mediation course of is nearing an in depth and we anticipate to deliver the Genesis Chapter 11 case to a conclusion quickly,” it added.

In January, the US Securities and Trade Fee dealt an additional blow to each corporations by suing Gemini and Genesis, charging that their crypto-lending programme was not registered correctly as a securities providing.