Crypto Billionaire Cameron Winklevoss Ups Ante In Bankruptcy Dispute With Barry Silbert

So much for a peaceful holiday.

On July 3, bitcoin billionaire Cameron Winklevoss, twin brother of Tyler Winklevoss, published a scathing letter addressed to Digital Currency Group founder Barry Silbert in a bid to force the embattled mogul to settle with his creditors.

“You have never had any intention of doing the right thing and taking responsibility for the mess that you, your companies, and your employees created with your reckless and fraudulent behavior,” writes Winklevoss in the letter, which he shared on Twitter, and which reiterates accusations of accounting fraud he first leveled in January.

DCG and Silbert did not respond to requests for comment. In January, a spokesperson for the firm denied the allegations and described Winklevoss’s initial letter as a “desperate and unconstructive publicity stunt.”

Genesis Global Capital, the lending arm of Silbert’s digital assets conglomerate, filed for bankruptcy in January after making bad loans, including to FTX’s sister company Alameda Research, which shut down in November following fraud allegations against its founder Sam Bankman-Fried (which he denies).

Genesis owes more than $3.5 billion to its largest 50 creditors, including $766 million earmarked for customers of Gemini, a crypto exchange run by the Winklevoss twins, according to Genesis’s Chapter 11 bankruptcy filing from January. Gemini had previously partnered with Genesis on its Gemini Earn program, which lent out customers’ crypto to generate yield.

Winklevoss vowed in his letter to sue Silbert personally if DCG does not agree to Gemini’s proposed “Final Offer” for Silbert’s company to pay a near $1.5 billion settlement to Gemini Earn customers by the end of this week, as outlined in a second Tweet. (The higher dollar price tag appears to account for crypto prices skyrocketing between the original Chapter 11 filing and now). Winklevoss also pledged to file a turnover motion, which could force DCG to turn over its assets to a third party to distribute them to creditors.

DCG had announced an initial restructuring term sheet in February that would involve the Winklevoss brothers chipping in $100 million of their personal funds, but that deal fell apart: DCG says that some creditors “reneged and raised new demands.”

“My speculation is that DCG floated a term sheet out there, and in fact did not have the alignment out there [among creditors],” says Ram Ahluwalia, CEO of crypto firm Lumida, who is not involved in the dispute but has been closely following the situation.

The parties moved to mediation in May after DCG failed to make a scheduled $630 million loan payment to Genesis. Winklevoss now says in his public letter that the move was a ploy for Silbert to obtain “infinite forbearance” on the loan payment.

Complicating the matter further is that Genesis is also now being sued by the bankrupt crypto exchange FTX (founded by former billionaire Sam Bankman-Fried), which filed a lawsuit in May seeking to reclaim about $3.9 billion in cash and crypto assets from Genesis. Lawyers for FTX alleged that Genesis “was one of the main feeder of funds for FTX and instrumental to its fraudulent business model.” Genesis denies wrongdoing and is contesting the legal action.

“Since this proceeding is mainly between two entities which have filed for Chapter 11 bankruptcy, ultimately the funds will be taken from one set of debtors to benefit another set of debtors,” Fatemeh Fannizadeh, chief of legal affairs and a board member at the Swarm Foundation, which is not involved in the litigation, previously told Forbes. “Which ones are more legitimate to be made whole is yet another question.”

Silbert’s 40% stake in DCG was once worth over $3 billion, after investors in the digital asset conglomerate sold $700 million of stock in a secondary sale at a $10 billion valuation in November 2021. Today Forbes estimates Silbert is worth around $450 million, thanks to an early bet on bitcoin. Luno, a crypto exchange owned by DCG, laid off about 35% of its employees earlier this year.

The Winklevoss twins, too, were also once worth over $4 billion each, per Forbes; Gemini was previously valued at $7 billion by outside investors. Today, each twin is worth an estimated $1.5 billion. Trading volumes on Gemini cratered after the Earn fiasco. In an apparent effort to reboot its business, Gemini recently announced it was seeking a crypto license in Dubai.

The Silbert-Winklevii relationship dates back to 2021, when Gemini launched its Gemini Earn program, an interest-bearing program for yield-hungry crypto investors. Serving as an agent, Gemini directed its Earn customer funds to Genesis, which lent out those assets to other investors, including Alameda Research, the hedge fund and sister company of FTX. In November last year, following FTX’s blowup, Genesis halted withdrawals by Gemini Earn customers, leaving 230,000 people without access to their crypto.

Winklevoss’s fraud allegations pertain to a $1.1 billion “promissory note” that DCG issued to Genesis last June, after one of its biggest borrowers, crypto hedge fund Three Arrows Capital, went bankrupt. Winklevoss alleged in January that the $1.1 billion note was “a complete gimmick that did nothing to improve Genesis’ immediate liquidity position or make its balance sheet solvent.” (Genesis has denied these allegations).

The U.S. Securities and Exchange Commission sued Genesis and Gemini in January, alleging that the two parties sold unregistered securities through the Gemini Earn program. The SEC lawsuit is one area where both Silbert and the Winklevii are in agreement, as both parties are moving to have the case dismissed, on the basis that Earn products were not investment securities.