In a recent court filing on a Friday, cryptocurrency exchange platform Gemini has made serious accusations against Digital Currency Group (DCG), a prominent player in the crypto industry. Gemini alleges that DCG engaged in fraudulent activities and is attempting to evade responsibility for the harm caused to creditors. This legal battle sheds light on a complex and contentious issue within the crypto space.
Gemini’s Claims Against DCG:
According to Gemini, DCG is accused of devising a $1.1 billion promissory note as a means to conceal significant financial losses resulting from the collapse of Three Arrows Capital (3AC). The filing suggests that DCG kept the actual terms of this note hidden, leading to misleading representations to Gemini’s creditors. Furthermore, Gemini claims that DCG borrowed a substantial amount of Bitcoin (BTC) from the company instead of providing the much-needed capital.
What further exacerbates the situation is that DCG allegedly refuses to repay the over $630 million it borrowed from Gemini, a debt that was due several months ago in May. This has prompted Gemini to take legal action against DCG.
DCG’s Proposed Deal and Gemini’s Response:
In response to the ongoing dispute, DCG has proposed an agreement that would require Genesis creditors, including Gemini, to extend credit to DCG over several years. However, Gemini is staunchly opposing this proposal, asserting that DCG should pay creditors a fair and adequate amount.
The court filing reveals that Gemini believes DCG has been employing tactics to “wear down” creditors over the past ten months, hoping they would settle for a significant reduction in the amount owed. Gemini, however, remains determined to pursue a just resolution.
Critique of DCG’s Proposed Recovery Rates:
Gemini criticizes DCG’s proposed recovery rates, arguing that they are “misleading and deceptive.” Gemini insists that receiving fractional shares of interest and principal payments over a prolonged period from a risky counterparty does not equate to receiving the actual cash and digital assets owed by Genesis. The exchange demands that DCG significantly improve the terms of the loans it provides if it wishes to gain the support of affected individuals.
Gemini’s Accusation Against DCG:
In summary, Gemini accuses DCG of being the mastermind behind its subsidiary’s insolvency and sacrificing the exchange and its creditors to shield itself from liability. The company founded by the Winklevoss twins contends that DCG’s delay tactics have hindered progress in distributing funds to Gemini Lenders, despite Gemini’s offer of a $100 million premium for a swift resolution.
This legal battle follows months of negotiations between the crypto lender and DCG and the fallout of the Gemini Earn program, which resulted in lawsuits and severed ties between Digital Currency Group and the cryptocurrency exchange.