DCG Drama Recap: Winklevoss Letter, Grayscale Troubles, Class-Action Arbitration

Barry Silbert’s woes continue as Cameron Winklevoss ratchets up the pressure, Gemini Earn customers file for class-action arbitration, and Grayscale’s Ethereum Trust trades at its lowest discount ever.

New Year, Same Problems

Digital Currency Group and its subsidiaries are still suffering from FTX-related liquidity issues. 

Yesterday, Gemini co-founder Cameron Winklevoss published an open letter on Twitter in which he accused DCG founder Barry Silbert of “engaging in bad faith stall tactics” with regards to Genesis’ current liquidity problem.

Genesis is a crypto lending company and a subsidiary of Digital Currency Group. The firm paused redemptions and new loan originations on November 16, citing “unprecedented market turmoil” due to the FTX collapse. As a result, Gemini was forced to halt its Earn Program, which relied on Genesis to provide lending services to Gemini customers. 

Winklevoss claimed that Silbert had been hiding “behind lawyers, investment bankers, and process” for the past six weeks to avoid meeting face-to-face with Gemini heads. According to Winklevoss, Genesis owes Gemini customers approximately $900 million, while DCG itself owes Genesis $1.675 billion. Silbert shot back with a tweet claiming that DCG had not borrowed $1.675 billion from Genesis, and that the company had delivered a relevant proposal on December 29 to both Gemini and Genesis—with no response from Gemini.

Three Gemini Earn users have also reportedly filed a request for class-action arbitration against DCG and Genesis, alleging that Genesis is breaching the Master Agreement between the firm and its users by failing to return Gemini Earn clients’ digital assets. A related class-action lawsuit has already been filed against Gemini.

Meanwhile, Grayscale’s Ethereum Trust (ETHE) has hit a record discount of -60%, meaning that the investment product is trading for 60% less than the value of its underlying assets. Grayscale is another DCG subsidiary; the discount can be attributed to pessimistic investor outlook with regards to DCG solvency, with regards to the crypto market in general, and with regards to the Trust itself being approved as a spot ETF. 

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.