Digital Currency Group Seeks Dismissal of Gemini’s Fraud Allegation

Digital Currency Group (DCG), the parent company of Genesis Capital Global, aims to counter the claims of fraud raised by the Winklevoss-owned Gemini Exchange. DCG has responded with a motion to dismiss the allegations, terming them as a continuation of a public relation campaign and a form of blame-shifting by the crypto exchange.

On July 7, Gemini sued DCG and its Founder, Barry Silbert, for allegedly defrauding investors through DCG's subsidiary Genesis. According to the lawsuit, DCG misrepresented the financial situation of the subsidiary, which managed Gemini's Earn program.

Thus, customers continued to participate in the lending business of Genesis despite being aware of its losses that were caused by the collapse of Three Arrows Capital, a hedge fund also known as 3AC. However, DCG has refuted the claims, saying the crypto exchange failed to adequately substantiate its allegations.

DCG's Responses

In the lawsuit filed today (Thursday), the group maintains that it had no direct operational involvement with Gemini's Earn program. Besides that, DCG claims that Gemini encouraged its customers to lend digital assets to Genesis in exchange for an interest income.

"Through the Gemini Earn Program, Gemini actively encouraged its existing customers to lend their digital assets, including cryptocurrency, to Genesis in exchange for interest, representing to its customers that it was a sophisticated market participant and that it had thoroughly vetted Genesis," DCG wrote.

1/ Today, DCG filed a motion to dismiss the lawsuit filed by Gemini against DCG and Barry Silbert. Read the full preliminary statement here: pic.twitter.com/9DFOSY3t35

Introduced in 2021, Gemini's Earn program allowed retail customers to earn interest on their cryptocurrencies by lending them to Genesis. However, the collapse of 3AC in June 2022 and the subsequent fall of FTX five months later negatively affected Genesis. Thus, the crypto lender suspended withdrawals from the Earn program and filed for bankruptcy in January.

DCG Takes On Gemini

DCG has termed Gemini's allegations as the continuation of a public relations campaign by Cameron and Tyler Winklevoss. DCG alleges that the campaign is aimed at deflecting the blame from the management of Gemini.

Additionally, DCG is seeking dismissal of Gemini's claims regarding a meeting where Silbert reportedly assured the Winklevoss twins that DCG had absorbed the losses caused by the collapse of 3AC. The filing revealed that DCG has successfully moved the case from New York's State Supreme Court to the US District Court for the Southern District of New York.