- Cameron Winklevoss and Barry Silbert went head to head on Monday after Gemini co-founder published an open letter to Silbert on Twitter.
- Winklevoss is the co-founder of the crypto exchange Gemini and is known for suing Facebook with his brother in the early days of the social network.
- Barry Silbert is a crypto billionaire and one of the most influential people in the industry. He’s the founder and CEO of Digital Currency Group (DCG), a conglomerate of five crypto-focused companies.
- The two are fighting each other over the $900 million dollars that belong to Gemini Earn users.
Gemini co-founder Cameron Winklevoss shocked the cryptocurrency industry with his open letter to Digital Currency Group (DCG) founder and CEO Barry Silbert published on Twitter on Monday.
In it, Winklevoss accused Silbert of avoiding direct contact with Gemini representatives regarding the $900 million Genesis, DCG’s lending subsidiary, owes to Gemini’s Earn lending program users after suspending its operations in November.
Winklevoss also said that DCG and Gemini are “beyond commingled,” something Silbert has been vehemently denying to this day. Silbert is now facing an ultimatum from Gemini, which asks him to commit publicly to solving the problem by January 8.
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Winklevoss’ attempt to escalate the situation has eerie similarities to the beginning – and sudden end – of the conflict between Binance’s Changpeng Zhao and disgraced crypto baron Sam Bankman-Fried. Some argue that DCG’s role in crypto is even larger than FTX’s, and a blowup of DCG and its subsidiaries would be a catastrophe crypto has never seen before.
But who exactly are Winklevoss and Silbert? Why are they fighting? And how can this clash between Gemini and DCG end?
Who Are Cameron Winklevoss and Barry Silbert?
Cameron Winklevoss, together with his twin brother Tyler Winklevoss, are best known for their lawsuits against Facebook and its founder Mark Zuckerberg in the early 2000s. The twins alleged that Zuckerberg illegally took their idea of a social network and created Facebook.
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After years of legal battles and millions lost in the process, in 2014, the Winklevoss twins co-founded Gemini, a crypto exchange that has cultivated a reputation as a safe and regulated centralized exchange in the world. Gemini has consistently been one of the largest exchanges throughout the years.
Both brothers have been actively participating in the development of the exchange, with Tyler being the CEO. Cameron, who is also an Olympic rower, stepped down as the director of Gemini’s European division last October but still sits on multiple boards inside the Gemini environment. Both of the brothers are crypto billionaires.
Barry Silbert, the addressee of Cameron Winklevoss’ open letter, is the founder and CEO of Digital Currency Group (DCG), a conglomerate of five cryptocurrency-focused companies founded in 2015. Those companies include Genesis Global Capital, Grayscale Investments, CoinDesk, Foundry, and Luno.
Silbert is a veteran investor in cryptocurrencies – he started investing in Bitcoin back in 2012. On top of his massively profitable Bitcoin trades, he was an early investor in Coinbase and Ripple. According to Forbes, Silbert was worth $3.2 billion as of April of last year.
Silbert’s DCG is mostly known for Grayscale, the asset management firm running the world’s largest Bitcoin trust fund, GBTC. The company has been the most profitable out of the five but recently has been facing mounting pressure from regulators and investors alike for failing to convert GBTC into an ETF, which has caused the shares of the fund to trade at a 50% discount.
Gemini and DCG Conflict Explained
So why are Winklevoss and Silbert in conflict? It goes back to November 17 of last year when Genesis Global Capital, the lending arm of DCG’s Genesis, announced that it was pausing redemptions and new loan originations in the wake of the bankruptcy of FTX.
Hours after, Gemini came out with a statement saying it was halting withdrawals for Gemini Earn, its lending program that offered up to 8% interest to its users. The move was no surprise since it was public knowledge that Gemini used Genesis for its Earn program.
However, it’s now been more than two months since Genesis halted redemptions. During that period of time, many speculated that either Gemini or DCG (or both) is going to file for bankruptcy. None of this has happened yet but what did happen was the public got the numbers.
It turns out that Genesis owes Gemini Earn users more than $900 million. It also turns out that DCG owes its subsidiary Genesis $1.675 billion. While Silbert denies DCG borrowed from Genesis, it’s still unclear why Genesis needed to halt its operations and where the $900 million of user deposits went.
Perhaps it all goes back to the fateful day the crypto hedge fund Three Arrows Capital (3AC) blew up. It was reported that when Terra Luna imploded and 3AC got burnt so much that they filed for bankruptcy, Genesis lost around $1.1 billion in loans to 3AC.
Or perhaps the chain of events looks something like this: Gemini took almost a billion dollars from users to deposit it to Genesis; Genesis lent it out to 3AC; 3AC lost it either when Terra Luna imploded or perhaps loaned it to FTX; FTX loaned it to Alameda; and Alameda either lost or stole it.
In any scenario, there are billions of dollars missing and someone is going to pay the price for losing them. It’s no surprise that Winklevoss is publicly accusing Silbert of losing the funds and ignoring communications with Gemini, after all, there are real people behind the numbers. However, recent developments in the crypto industry have shown that it’s never a good idea to trust someone completely. It might as well be that Gemini itself is in some sort of a bad situation.
Winklevoss issued an ultimatum to Silbert: Commit to solving the problem by January 8, or… He didn’t go into detail about the consequences for Silbert if he doesn’t do this. Let’s wait and see what happens on January 8.
On the Flipside
- There are still many unknowns in this Gemini and DCG story.
- Winklevoss’ public letter might have been a PR stunt aimed at putting all of the blame on Silbert and DCG.
Why You Should Care
Cameron Winklevoss, together with his brother Tyler Winklevoss, and Barry Silbert are some of the most important people in the cryptocurrency industry. Their public beef indicates that both of the companies are in dire situations. The crypto industry and community can only hope for a different ending to this story than what happened with Sam Bankman-Fried and FTX.
