Gemini followed through on its self-imposed deadline to sue Digital Currency Group and its CEO Barry Silbert on Friday, marking the largest escalation yet of the company’s attempts to recoup substantial funds it says it’s owed.
The lawsuit, filed in New York state court on Friday, said its claims are “about fraud.” The legal action alleges that DCG and Silbert “engaged in a fraudulent scheme to induce a variety of depositors, including Gemini users,” in order to “lend huge amounts of cryptocurrency and U.S. Dollars to DCG’s subsidiary Genesis Global Capital.”
Gemini claims that both DCG and Genesis “falsely represented that DCG had absorbed the losses on the 3AC loans at the parent level” and claimed it was “business as usual.” The company had floated a Thursday deadline to reach a settlement before resorting to legal action.
Genesis, the lending conglomerate arm of DCG, was at the time, however, insolvent, the suit said. Silbert and Gemini have been embroiled in a prolonged disagreement regarding the amounts in question.
Following the collapse of FTX, Gemini claimed Genesis “refused to honor its obligations and suspended all withdrawals of borrowed cryptocurrency.” A $1.1 billion infusion from DCG, as it turns out, was said to be only a “promissory note that was not due until 2023.”
Gemini claims it has attempted to work toward solutions to return assets to the Gemini Earn lenders, but it has yet to find common ground with DCG or Silbert “despite paying public lip service to that goal.”
The fact that Gemini is not a creditor in Genesis’ bankruptcy proceedings led the company’s attorneys to claim their own situation is complex — one stated rationale behind the lawsuit.
The lawsuit alleges two counts: fraud and aiding and abetting fraud.
DCG and Silbert “aided and abetted Genesis in making fraudulent misrepresentations to Gemini with respect to Genesis’s financial condition and the support it received from DCG,” the suit said.
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Source: https://blockworks.co/news/gemini-suit-accuses-dcg-silbert-of-aiding-and-abetting-fraud