DCG Appears to be Crumbling as C. Winklevoss Calls For Resignation of Barry Silbert
Eight days ago, Cameron Winklevoss penned an open letter to Barry Silbert. Disseminated through Twitter, this letter caught many off-guard, as it contained various accusations and harsh truths which have come to light over the past few months.
The issue at hand stems from roughly $900,000,000 owed to Gemini by Genesis Global Capital – a subsidiary of Digital Currency Group (DCG) with close, and reportedly questionable ties to one another. Now, over a week later, without either company able to come to an agreement on repayment terms, Cameron Winklevoss has penned a follow up to his initial letter – this time calling for the resignation of DCG CEO, Barry Silbert.
To the Point
This newly penned letter, which is addressed to the ‘Board of Digital Currency Group', wastes no time in getting to the point. Right off the bat, C. Winklevoss states,
“…Gemini and more than 340,000 Earn users have been defrauded by Genesis Global Capital, LLC (Genesis), together with its parent company Digital Currency Group, Inc. (DCG), its founder and CEO Barry Silbert, and other key personnel.”
C. Winklevoss proceeds to state that both Gemini and its customers were lied to about the solvency of DCG, as the latter gave the impression that it maintained a strong financial foundation – a serious accusation that could very well lead to legal trouble for DCG if true. While DCG has given vague looks in to its actions over the past year through sporadic communications, C. Winklevoss breaks down the timeline of events over the past year which led to the situation at hand .
- Genesis lends >$2.3B to Three Arrows Capital (3AC)
- 3AC goes defunct, defaulting on its loans
- Genesis hit with loss of $1.2B on loan to 3AC
What seems like a simple, albeit unfortunate, chain of events was then made in to what is now being viewed as a crisis.
C. Winklevoss alleges that while Silbert had the opportunity at the time to shore of the balance book of Genesis, the trio (DCG, Genesis, Silbert) made the decision to instead mislead onlookers into thinking that DCG had absorbed the hit by infusing Genesis with $1.2B of its own capital.
Fast forward to the present, and it turns out that rather than injecting fresh capital to ensure Genesis stayed afloat, DCG had simply issued a 10-year promissory note. This being a misrepresentation that allowed for the companies to assuage investors and partners, and for it to continue forth with normal operations.
In an attempt to understand and answer the question as to why the aforementioned trio would perpetrate such a fraud, C. Winklevoss provides the simplest and most likely answer that continues to plague many of the bad-actors within the space.
Here is where the situation becomes somewhat convoluted. Not only does C.Winklevoss state that the trio misrepresented steps taken to ensure good financial health, but that a seriously questionable relationship between DCG, its subsidiaries, and 3AC existed all along.
Essentially, it is believed that DCG devised a plan to rake in billions through the fees generated by the Grayscale Bitcoin Trust (GBTC) as capital flowed in to the locked trust from purchases made by 3AC, with loans issued by Genesis.
“3AC was a mule shuttling the assets between the parties, and as a result Genesis ended up owning massive risk.”
This entire plan was built on the premise that GBTC would be continue to be valued higher than Bitcoin, and because GBTC cannot be withdrawn from the trust, they would be able to weather the storm until any persisting discount subsides.
The fact that the digital asset market is still experiencing fallout from events that began nearly a year ago is certainly disheartening. It also does not bode well for the ongoing FTX fiasco, which will no doubt also result in similar collateral damage well in to the future.
This open letter, which began with C. Winklevoss explaining to the DCG Board of the fraud it has been a victim of, closes with a clear request. Fire Barry Silbert.
“…Gemini, acting on behalf of 340,000 Earn users, requests that the Board remove Barry Silbert as CEO, effective immediately, and install a new CEO, who will right the wrongs that occurred under Barry's watch.”
It should be noted that while this is looking increasingly likely as time passes, the above chain of events has not yet been proven. For now these are simply allegations being made by a once respected exchange that has now been burned by industry events and poor decisions of its own over the lingering crypto winter.