Who Is Barry Silbert, The Former Crypto Billionaire That Cameron Winklevoss Is Accusing Of Accounting Fraud?


Digital Currency Group CEO Barry Silbert has been accused of fraud by his ex-business partner turned rival, Cameron Winklevoss. The stunning allegations follow Forbes’ estimates last month that Silbert’s fortune had evaporated, and as government investigations into Silbert’s companies ramp up.


Barry Silbert, the CEO of troubled crypto empire Digital Currency Group (DCG), defrauded some 340,000 crypto investors using Gemini Earn, according to allegations made by Cameron Winklevoss, CEO of crypto exchange Gemini, in a scathing open letter published to Twitter Tuesday morning.

The allegations come nearly two months after Genesis Global Trading, DCG’s wholly owned lending firm, suspended withdrawals for customers in the wake of FTX’s collapse. Gemini had partnered with Genesis for its “Gemini Earn” product, which offered investors annual interest returns of up to 8%.

Silbert and his companies “defrauded” Gemini customers by “conspir[ing] to make false statements and misrepresentations about the solvency and financial health of Genesis,” alleges Winklevoss. “By lying, they hoped to buy time to dig themselves out of the hole they created.”

In response, a DCG spokesperson said in an emailed statement to Forbes: “This is another desperate and unconstructive publicity stunt from Cameron Winklevoss to deflect blame from himself and Gemini, who are solely responsible for operating Gemini Earn and marketing the program to its customers. We are preserving all legal remedies in response to these malicious, false, and defamatory attacks. DCG will continue to engage in productive dialogue with Genesis and its creditors with the goal of arriving at a solution that works for all parties.”

The US Attorney’s Office for the Eastern District of New York is investigating transactions within the DCG empire and the SEC has also opened an investigation, Bloomberg reported last week. Silbert and his companies have not been charged with any crime. DCG has “no knowledge of or reason to believe that there is any Eastern District of New York investigation,” a spokesperson said. Last month, Forbes wrote down the value of Silbert’s stake in DCG from $3.2 billion to $0. “Forbes estimates the value of DCG’s outstanding liabilities are greater than the fair market value of its assets in the current market environment,” we wrote at the time.

The last few months have been a stunning fall from grace for Silbert, a longtime crypto evangelist who says he first invested in Bitcoin in 2012. Prior to his involvement in digital assets, Silbert was an investment banker and financial entrepreneur. He graduated from the Goizueta Business School of Emory University in 1998, followed by a six-year stint at investment bank Houlihan Lokey, where he specialized in financial restructurings. There, Silbert worked on some of the most prominent bankruptcies of the Dot-Com collapse, including Enron and WorldCom.

In 2004, Silbert founded Restricted Stock Partners, a secondary trading platform for employees of companies with restricted stock in public companies. “It’s the largest asset class without a developed secondary market,” Silbert told the New York Times in a 2005 profile. “It’s not a new or novel concept but the time is right because of the proliferation of hedge funds.”

Silbert rebranded his company to SecondMarket in 2008 as he expanded the trading platform to include private company stock and alternative investments, after an early Facebook employee approached Silbert’s company to ask if they could help him sell his shares. By 2011, SecondMarket had facilitated billions of dollars in private market transactions and had over 75,000 registered users.

As SecondMarket grew, so did Silbert’s reputation as a financial entrepreneur. In 2009, he was named one of Ernst & Young’s Entrepreneurs of the Year, and as Crain’s’ Entrepreneur of the Year. Michael Bloomberg, then mayor of New York City, invited Silbert to join his Council on Technology and Innovation. Silbert was named to Fortune’s “40 Under 40” list. He provided testimony to the U.S. Senate on financial regulations.

One former SecondMarket employee remembered Silbert as “very much a by-the-book kind of guy.” Dealing in unregistered securities, Silbert was “focused on making sure we were in good standing” with regulators.

A second early former employee, who worked at the company for several years, described SecondMarket as “a master class in the Silicon Valley trait of hyping a company prior to actually building it.” SecondMarket representatives were “pitching it as an online marketplace of illiquid assets,” but the company “never moved passed a highly manual process requiring humans to executive every aspect,” says the ex-employee.

As for Silbert’s management style: “Barry as a person was cold and wouldn’t even make eye contact with anyone but the few senior people he interacted with,” the former SecondMarket employee says. “He delegated morale building to others and rarely spoke to people even when it was 20 people in the office.”

Nasdaq bought SecondMarket in 2015 for an undisclosed amount. That same year, Silbert launched Digital Currency Group and styled it as an old-school holding company, but built for the Web3 age. DCG founded and acquired assets including news site CoinDesk, bitcoin public trust Grayscale, bitcoin mining company Foundry, and approximately 200 other digital asset investments and tokens.

“Being part of DCG has been great in the sense that Silbert lets us think long term, in terms of decades, and is not really worried about month to month, quarter to quarter results,” Mike Colyer, CEO and founder of bitcoin miner Foundry, told Forbes last month.

The value of DCG’s portfolio ballooned amid crypto’s bull market run during the pandemic. In November 2021, some Digital Currency Group investors sold around $700 million of their shares at a $10 billion valuation.

“We’re the best proxy for investing in this industry,” Silbert boasted to CNBC at the time. Silbert also compared himself to 19th century oil tycoon John D. Rockefeller. “The model I use as an inspiration is Standard Oil,” he told the Wall Street Journal, comparing DCG’s crypto portfolio to Rockefeller’s oil conglomerate.

Grayscale, an investment trust that holds Bitcoin on behalf of investors, quickly became DCG’s most valuable asset, as institutions and high-net-worth investors clamored for a way to gain exposure to Bitcoin. The publicly traded shares of Grayscale’s Bitcoin Trust (GBTC) offered investors access to Bitcoin’s upside–but without having to actually buy and store the digital currency, which many were prohibited from doing. In turn, Grayscale charged a flat 2% fee, higher than other ETFs and closed-end funds, and restricted investors from making immediate redemptions for the underlying asset. At its peak, GBTC’s underlying Bitcoin assets were worth over $43 billion. Grayscale offers similarly structured products for other crypto assets, including Ethereum.

“In the early days everybody kind of celebrated it,” recalls Mike Belshe, CEO of crypto custodian BitGo. “I think a lot of people were a little bit jealous of Grayscale for having such a lucrative product. It is a bit of a cash cow.” Indeed, Grayscale’s GBTC product generated $471 million of revenue in 2021.

As Grayscale caught on with investors, a so-called “GBTC premium” emerged, in which the price of GBTC shares were trading for a higher price than the underlying Bitcoin held by Grayscale. That presented an arbitrage opportunity for hedge fund investors, including the ambitious Three Arrows Capital. Genesis, DCG’s lending unit, began lending money to Three Arrows, which it plowed back into GBTC shares, thus continuing to prop up the GBTC premium.

This trade between Genesis and Three Arrows Capital “ballooned the AUM of the Grayscale Bitcoin Trust and, as a consequence, the fees earned by its sponsor, Grayscale Investments,” according to Cameorn Winklevoss, who alleges that Three Arrows Capital, “was acting as a mere conduit for Genesis, allowing it to enter into what were effectively swap transactions of bitcoin for GBTC shares with the Grayscale Trust.”

In 2021, the GBTC premium turned into a GBTC discount (wherein GBTC shares began trading for less than the underlying Bitcoin). Yet, Genesis continued to lend to Three Arrows Capital. “This had the desired effect of keeping GBTC shares from being sold into the market,” Winklevoss notes, “but for Genesis, this had the undesired effect of keeping its risk position open and allowing it to grow.”

Meanwhile, the parent company Digital Currency Group began borrowing money from Genesis, its own lending firm, which it plowed back into GBTC, the publicly traded trust of its own subsidiary Grayscale. DCG bought nearly $800 million worth of GBTC shares after the GBTC premium became a discount.

“DCG was making a hedge fund-like trade, buying their own product on leverage,” says Ram Ahluwalia, CEO of crypto investment advisor Lumida Wealth.

When Three Arrows Capital blew up in June 2022, Genesis was left with a roughly $1.2 billion hole on its balance sheet, which it then moved to the books of its parent company, Digital Currency Group, in the form of a promissory note due over 10 years.

“They had a solvency issue at Genesis, which they transformed into a liquidity issue,” says Ahluwalia. “But those losses don’t disappear.”

For another five months after Three Arrows’ collapse, Gemini, the Winklevoss’ exchange, continued to rely on Genesis for its Earn Program, and users could continue to redeem their crypto. But the blowup of FTX tipped the scales, causing Genesis to pause all redemptions.

Following FTX’s collapse, Genesis was reportedly seeking a $1 billion cash infusion, but there were no takers as investors ran for the hills. A few days ago, DCG wound down its HQ wealth management business, and Genesis laid off 30% of its staff.

This story was updated to provide comment from DCG on Bloomberg’s report about a New York investigation.



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These Crypto Founders And Bitcoin Moguls Lost $116 Billion In 2022

The embattled cryptocurrency industry and its wealthy pioneers face a moment of reckoning after the collapse of crypto exchange FTX and hedge fund Alameda Research

In January 2022, Sam Bankman-Fried was riding high. His Bahamas-based FTX had just raised $400 million from prominent venture capitalists at a $32 billion valuation. A few weeks later, when Forbes published its annual World’s Billionaires list, SBF, as he’s known, was crypto’s second-wealthiest person, worth $24 billion.

Now, Bankman-Fried is likely broke, and awaiting trial. Before he was arrested in the Bahamas, SBF told several media outlets his bank account was down to $100,000, and that he was “not sure” how he’ll pay his lawyers. Gary Wang, FTX’s other cofounder and the company’s former chief technology officer–who entered a plea deal with the Securities and Exchange Commission–has also seen his fortune, once estimated at $5.9 billion, wiped.

FTX’s demise was a fitting end to a year of wealth destruction in the cryptocurrency and blockchain sector. The post-pandemic economic shock, which triggered inflation and rising interest rates, sucked capital out of the speculative crypto ecosystem. Prominent firms imploded, from the $40 billion collapse in May of algorithmic stablecoin TerraUSD, to the crypto hedge fund Three Arrows (which declared for bankruptcy in July), to the bankruptcies of interest-bearing lending businesses Voyager Digital, Celsius and BlockFi. Bitcoin, the largest cryptocurrency and an industry bellwether, is down 65% from its $69,000 peak in November 2021. Meanwhile some $2 trillion of market value has fled digital assets for safer pastures.

As a result, 17 of crypto’s wealthiest investors and founders have collectively lost an estimated $116 billion in personal wealth since March, according to Forbes’ estimates. Fifteen of them have lost more than half their fortune over the past nine months. Ten have lost their billionaire status altogether.

“We’re now at the breaking point in crypto where everyone will have to take a pause and say, ‘Okay, we’ve seen a ton of economic wealth destroyed in the last couple of months, we need to start taking this seriously,’” says Matt Cohen, founder of Ripple Ventures, a venture capital firm. “A lot of blockchain technologies and crypto companies built solutions for problems that didn’t need fixing, and I think we’re now going to have a hard reset.”

The man with the most to lose is Changpeng Zhao, CEO of Binance, crypto’s largest exchange, a sprawling global network of murky subsidiaries. CZ, as he’s known, has an estimated 70% stake in Binance, which Forbes’ values at $4.5 billion–down from $65 billion in March.

CZ helped set FTX’s demise in motion on November 6 when he tweeted that Binance would sell its remaining FTT, the native cryptocurrency of FTX. That triggered a run on FTX’s coffers as customers scrambled to withdraw their money, only to discover it was gone. FTX declared bankruptcy a few days later. Zhao prevailed over his rival, but now he must contend with the consequences. That could include the clawback in bankruptcy court of the over $2.1 billion that Binance made from selling its stake in FTX back to Bankman-Fried in the summer of 2021. (Zhao helped seed FTX in 2019.)

CZ also faces increased skepticism of centralized exchanges, particularly Binance, and ongoing investigations of him and his company by authorities in Europe and the United States over allegations of facilitating money laundering and other financial crimes. (Binance has denied wrongdoing.) In recent weeks, CZ has sought to reassure Binance users that their crypto deposits are fully backed, commissioning accounting firm Mazars to produce “proof of reserves” reports. These statements, which do not include liabilities, were widely criticized as insufficient for providing an incomplete snapshot of a company’s financial health. Mazars has since paused its work with crypto companies, adding to the uncertainty around Binance’s finances–and the exchange’s future.

“I don’t believe a business can persist, operating in this amorphous way, not governed by anyone or anywhere, especially when it’s run by a public individual,” says Lisa Ellis, an equity analyst at MoffettNathanson, a division of SVB Securities. Binance’s “dodgy operating model” would be a “non-starter for many investors, public or private,” adds Ellis.

CZ stated in a webinar on December 23 that Binance has zero liabilities: “We are quite a unique organization, we don’t have loans from any other organizations,” he said. “We will prove all the FUD [fear, uncertainty and doubt] is wrong.” A spokesperson for Binance said that Forbes’ estimate of CZ’s net worth “not an important metric for CZ. What’s more important is creating meaningful use cases for crypto.”

Barry Silbert, head of crypto conglomerate Digital Currency Group, is at the heart of crypto’s market contagion. One of DCG’s key assets, crypto lending unit Genesis Global Capital, owes creditors at least $1.8 billion, according to a source familiar with the matter (and as Reuters first reported). Additionally, DCG is saddled with debt. It assumed a $1.1 billion liability from Genesis, which stemmed from a bad loan Genesis had made to the now-bankrupt Three Arrows hedge fund. Separately, DCG owes Genesis another $575 million, which is due in May. DCG also owes $350 million to investment firm Elridge if Genesis goes under, the Financial Times reported.

To stay afloat, Silbert will likely have to raise outside capital or dismantle his DCG crypto empire, which includes some 200 investments in crypto firms and tokens, including crypto news site CoinDesk, bitcoin mining firm Foundry and Grayscale Investments, an asset management business that offers shares in a publicly traded Bitcoin trust. Forbes estimates the value of DCG’s outstanding liabilities are greater than the fair market value of its assets in the current market environment; DCG may also struggle to offload illiquid bets. For these reasons, Forbes estimates the current value of Silbert’s 40% stake in DCG to be approximately $0. Silbert’s personal investments could not be determined. A spokesperson for DCG declined to comment.

“They had a solvency issue at Genesis, which transformed into a liquidity issue. But those losses don’t disappear,” says Ram Ahluwalia, CEO of crypto-focused Lumida Wealth Management, who points out that Genesis creditors will have claims on DCG assets even if Genesis declares bankruptcy. “If DCG doesn’t raise fresh equity capital it will be perceived as a zombie business.”

Cameron and Tyler Winklevoss, the bitcoin billionaires immortalized in The Social Network for their role in Facebook’s founding, are also caught in Silbert’s lending web. Gemini, the twins’ privately held crypto exchange, offered their users returns as high as 8% during the bull market through their Gemini Earn product, which outsourced the loanmaking to Genesis; now Gemini customers are owed some $900 million by Genesis. On November 16, Genesis suspended withdrawals, leaving customers outraged. Gemini Dollar, the exchange’s stablecoin and a key component of Gemini Earn’s lending program, has experienced large outflows. The Winklevii have remained quiet, apart from sparsely worded Twitter updates about Gemini forming a creditor committee.

For Brian Armstrong, who is the CEO of publicly traded exchange Coinbase, FTX’s collapse presented an opportunity to strike. On November 8, in the chaotic hours after Binance announced its tentative takeover of FTX, Armstrong trumpeted his vision for crypto while dissing Binance’s Zhao. “Coinbase and Binance are following different approaches. We’re trying to follow a regulated, trusted approach,” Armstrong said on the Bankless podcast. “To look at it intellectually honestly, we’re choosing to follow the rules. It’s a more difficult path and sometimes your hands are tied, but I think that’s the right long-term strategy.” In a 13-tweet thread that same day, Armstrong reiterated those themes.

Investors don’t seem to care. Coinbase’s stock is down 64% since August and more than 95% from its $100 billion IPO in April 2021, wiping out much of Armstrong’s fortune.

Meanwhile, Coinbase’s other cofounder, Fred Ehrsam, got burned by Bankman-Fried. His crypto venture firm Paradigm invested $278 million in FTX equity. Ehrsam has not issued any public statements about the investment. Matt Huang, Ehrsam’s partner at Paradigm, said on Twitter: “We feel deep regret for having invested in a founder and company who ultimately did not align with crypto’s values and who have done enormous damage to the ecosystem,” adding that Paradigm’s equity investment in FTX “constituted a small part of our total assets” and that Paradigm had never entrusted FTX to hold any of its digital asset investments.

Private crypto firms that raised capital in 2021 or earlier this year at high valuations are being traded at significant markdowns on secondary markets and in over-the-counter deals, says Matt Cohen of Ripple Ventures, who expects to see larger markdowns for the fourth quarter as companies prepare year-end investor reports. “Q4 audit season is going to be the time when the rubber meets the road on what funds are going to be marked down properly,” he says.

For example, shares of NFT exchange OpenSea are trading at a 75% discount since January, when OpenSea hit a $13.3 billion valuation, according to data from private market data platforms ApeVue and Caplight. Daily trading volumes on OpenSea’s NFT exchange have been under $10 million in the last month, compared to over $200 million back in January, according to crypto site DappRadar. OpenSea’s 30-something cofounders, Devin Finzer and Alex Atallahh, are no longer billionaires.

Nikil Viswanathan and Joe Lau, the founders of Alchemy, a crypto software firm that powers other Web3 ventures, have also departed the three-comma club, based on estimated markdowns of their stakes in Alchemy, which last raised outside capital in February at a $10.2 billion valuation. According to Viswanathan, FTX’s collapse “hurts the consumer perception of the [crypto] space. We’ve seen this play out in the Lehman Brothers and Bernie Madoff collapses in 2008 — it takes time to recover.” Alchemy, however, has continued growing throughout the bear market, says Viswanathan. “The difference is in Web3 we’ve seen developer activity accelerate during even the most tumultuous times, which points to an incredibly strong, mission-driven community of builders.”

Jed McCaleb, cofounder of crypto firm Ripple, is believed to be the only person who made their fortune in crypto to have retained most of his fortune through the downturn. But that’s because he sold out almost entirely before the crash. McCaleb offloaded some $2.5 billion worth of XRP, Ripple’s native token, between December 2020 and July 2022, fulfilling the separation agreement he signed with Ripple’s other founders back in 2013. Today, XRP trades around $0.40 per coin, down around 50% from earlier this year, when McCaleb was dumping millions of dollars’ worth of XRP tokens each week.

Chris Larsen, Ripple’s other founder and its chairman, has lost over $2 billion this year, due to XRP’s declining price and Forbes’ estimated discount on Ripple’s equity valuation. Ripple, which last raised capital in 2019 at a $10 billion valuation, bought back shares from an investor last year at an inflated $15 billion valuation after that investor had sued Ripple in connection with a Securities and Exchange Commission lawsuit filed against Ripple in December 2020; that case is still working its way through courts.

Tim Draper, a venture capitalist who holds around 30,000 bitcoins, dropped from the billionaire ranks earlier this year, when Bitcoin hit $33,000. As ever though, Draper remains optimistic about bitcoin’s future, even though his oft-repeated $250,000 price target looks more fanciful by the day. “I suspect that this is the beginning of the end of the centralized tokens,” Draper tells Forbes. “If a token is centralized, you’re at the mercy of the person who controls the currency. And that was definitely the case with FTX.”



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