Winklevoss twins secretly withdrew $282M in Gemini assets before Genesis collapse: sources
Title: Winklevoss Twins Withdrew $280M in Gemini Assets Prior to Genesis Collapse, Sources Reveal
Introduction
Cameron and Tyler Winklevoss, famously known for their dispute with Mark Zuckerberg over Facebook, secretly withdrew over $280 million from their crypto company’s bank, Genesis, shortly before the collapse of the firm. The withdrawals left customers unable to access their deposits, according to sources. The Winklevoss twins’ digital currency exchange, Gemini, has been struggling with layoffs and declining trading volume, leading to frozen customer deposits amounting to $900 million last November. This article will delve into the details surrounding this controversial move and shed light on the legal battle between the Winklevoss twins and Genesis owner Barry Silbert’s company, Digital Currency Group (DCG).
Withdrawal Details and Implications
The Winklevoss twins withdrew the substantial sum from Genesis on August 9, 2022, months before the lender suspended customer withdrawals. It remains unclear whether the withdrawn funds were corporate assets or the twins’ personal crypto holdings. However, the withdrawal did not include any Gemini customer funds. Internal documents and emails reviewed by The Post revealed a balance sheet indicating a decline of approximately $176 million in Gemini deposits between August 5 and August 10 of the same year. This decline was partially offset by customer deposits and cryptocurrency price fluctuations.
The withdrawn amount of $282 million encompassed various digital currencies, including bitcoins, ether, Gemini’s stablecoin, Dogecoin, and others. The timing of the withdrawal raises questions about the extent of the twins’ knowledge regarding Genesis’s financial woes in August 2022. This move could potentially undermine their claims in a pending lawsuit against Silbert and DCG, where they allege that they were misled about Genesis’s financial state.
Legal Battle and Potential Consequences
In July, the Winklevoss twins filed a lawsuit against Silbert and DCG, accusing them of providing false and incomplete information about Genesis’s financial health. They claim that DCG promised to backstop Genesis during its liquidity crunch in 2022 but failed to do so adequately. Genesis reportedly suffered a $1.1 billion loss due to a loan provided to the now-defunct crypto hedge fund, Three Arrows Capital.
While the legality of the withdrawal is yet to be determined, its timing and undisclosed nature raise concerns in terms of transparency and customer protection. John Coffee, an expert on securities law, highlights that respectable financial entrepreneurs or brokers would typically disclose their liquidation of investments when selling assets to customers. James Park, a former assistant attorney general, suggests that potential legal consequences, such as class-action lawsuits or fraud claims, could arise regardless of the classification of the withdrawn assets.
Gemini’s Troubled Business and Genesis Bankruptcy
Gemini has encountered significant challenges in recent years. Its US market share by trading volume plummeted to just 1% this year, down from 26% in 2017. The company has undergone multiple rounds of layoffs, and the Winklevoss twins had to secure a $100 million loan to sustain the business. Meanwhile, Genesis faced financial difficulties after the collapse of FTX in November, leading to a broader industrywide crisis and the lender’s inability to meet its obligations. This instability ultimately resulted in the freezing of $900 million in Gemini customer funds.
The legal battle between the Winklevoss twins and Silbert continues amid Genesis’s bankruptcy proceedings. The involved parties are currently engaged in negotiations mediated by the court to settle claims. A preliminary agreement has been reached, potentially allowing unsecured creditors to recover between 70% and 90% of their investments. However, Gemini and other parties contest the proposed deal, delaying its finalization.
Conclusion
The sudden withdrawal of $280 million by the Winklevoss twins from their company’s bank, Genesis, prior to its collapse raises questions about their knowledge of the lender’s financial difficulties. As Gemini struggles with declining trading volume and layoffs, the legal battle with Barry Silbert’s DCG further compounds the challenges faced by the twins. The withdrawn funds’ legality is open to interpretation, exposing Gemini and its co-founders to potential legal consequences. The unfolding events surrounding Genesis’s bankruptcy and the Winklevoss twins’ actions highlight the volatility and risks inherent in the cryptocurrency industry.
