Cameron and Tyler Winklevoss went from co-founders of Facebook who were duped by Mark Zuckerberg (as dramatized in the movie “The Social Network”) to early adopters of cryptocurrency.Bitcoin billionaires.” Now their company was accused by the United States Securities and Exchange Commission (SEC).
The SEC hit Gemini cryptocurrency exchange Gemini with securities violations on Thursday over its Gemini Earn program, which promised returns to customers who deposited their cryptocurrencies. Genesis, a lending partner in the program and a subsidiary of Digital Currency Group (DCG), was also charged in tandem with Gemini.
The charges come weeks later increasingly causing public controversy Between Gemini and DCG management after November the collapse of cryptocurrency exchange FTXtriggering a a fresh wave of industrial contagion because the funds stored in FTX are either locked or missing. Genesis is reportedly more on the hook Gemini client fund worth $900 million.
How did that happen? Here’s a look back at the Winklevoss twins’ rapid rise in the crypto industry and the recent moves that have led to a public spat between Gemini and DCG, SEC charges and an apparent gap in Gemini’s finances.
Construction of Gemini
The Winklevoss twins received about $65 million in cash and Facebook stock in a 2008 deal to create the social media giant. After founding the Winklevoss Capital family office in 2012, the brothers began amassing large amounts of Bitcoin. They had as many as twins 1% of circulating supply According to the leading cryptocurrency as of November 2013 The Washington Post.
They went from buying a Bitcoin dump to leading an investment round in BitInstant, the first Bitcoin exchange whose founder Charlie Schrem was later arrested for money laundering related to the Silk Road market. Also that year, the twins attempted to create the first Bitcoin ETF (or exchange-traded fund), which was rejected by the SEC.
In 2015, the Winklevoss brothers launched Gemini, a licensed cryptocurrency exchange in their hometown of New York. The platform has expanded and acquired over the years NFT Nifty Gateway market in 2019, ahead of the coming NFT market boom in 2021. The parent company was Gemini Space Station. It was valued at 7.1 billion dollars From November 2021.
Cameron and Tyler were first considered “Bitcoin billionaires” in 2017 (as chronicled by I hate the book of the same name) the price of Bitcoin rose to about $20,000 and Forbes Currently, each brother is guessing He has a net worth of $1.1 billion.
But with the cryptocurrency industry in turmoil over the past few months, Gemini and its founders have faced new challenges. In June 2022, the US Commodity Futures Trading Commission charge Gemini Bitcoin futures product and Gemini “made false or misleading statements” when asked for endorsements fired 10% of its employees as the cryptocurrency market crashes.
Gemini and Genesis
A new wave of turmoil in the cryptocurrency industry led to Gemini’s latest troubles, which began in early November. the collapse of cryptocurrency exchange FTX and sister trading firm Alameda Research.
Genesis soon announced that it would stop customer backtracking Due to the “FTX impact” its lending arm was unable to continue business as usual, citing “unprecedented market turmoil”. Genesis was Gemini’s partner for its Earn interest product, and Gemini said it would have to freeze customer funds as a result.
In December, Financial Times Genesis reported it was worth about 900 million dollars Customer funds from the Gemini Earn program. Digital Currency Group, which owns Genesis, Grayscale Investments and other crypto firms deals with liquidity problemsAccording to Cameron Winklevoss, despite its founder and CEO Barry Silbert assured investors otherwise.
In early 2023, private negotiations between Gemini and Genesis became public when Winklevoss wrote an open letter to Silbert. In the letter he He accused Silbert of “fighting with bad faith.” Towards resolving the funds dispute, suggesting evasive tactics by the DCG chief. Silbert has denied the allegations.
The allegations escalated on January 10 as Cameron Winklevoss He called on Silbert to resign, suggesting misrepresentation and accounting fraud at DCG. The the company responded Calling Winklevoss’ claims “another desperate and unconstructive publicity stunt” by the founders of Gemini, who said they were “solely responsible for running Gemini Earn and selling the program to their customers.”
The twins later made it official Stopped winning program, said it would force Genesis to repay more than $900 million in customer funds it has held. The program ran for about two years in partnership between Gemini and Genesis.
This situation remains unresolved as of this writing, but now both Gemini and Genesis face a new obstacle. SEC charges related to Gemini Earn. The agency alleges that the companies sold unregistered securities to customers, collecting billions of dollars worth of cryptocurrency from hundreds of thousands of users in the process.
“We allege that Genesis and Gemini offered unregistered securities to the public, circumventing disclosure requirements designed to protect investors,” SEC Chairman Gary Gensler said. “Today’s charges build on previous actions to make clear to the market and investment community that cryptocurrency platforms and other intermediaries must comply with our time-tested securities laws.”
In tweet replyTyler Winklevoss questioned the timing of the charges, saying Gemini has been in discussions with the SEC for 17 months and the program is regulated by the New York Department of Financial Services.
1/ It is disappointing @SECGov chose to act today @Twins and other creditors are working hard together to recover the funds. This action does nothing to further our efforts and help users recover their assets. Their behavior is completely counterproductive.
— Tyler Winklevoss (@tyler) January 12, 2023
“Despite these ongoing negotiations, the SEC chose to release the lawsuits to the press before notifying us. Super lame,” he tweeted. “Unfortunately, they’re optimizing for political considerations instead of helping us keep our 340,000 Earn users and other lenders going.”
He added, “Gemini has always worked hard to comply with all applicable laws and regulations.” Genesis and DCG have not yet commented on the SEC charges.