From Gemini to Genesis to Barry Silbert: The Winklevoss twins are in big trouble with cryptocurrency.

The Winklevii — or Tyler and Cameron Winklevoss, to use their names — first rose to fame in the mid-2000s when they claimed they stole the ideas for Facebook from Meta founder and CEO Mark Zuckerberg while they were studying together at Harvard. The story of the 6-foot-5 brothers was finally detailed in a 2010 film The social networkincluding the part where Zuckerberg paid them millions to go away.

Rowing fans may recognize the Winklevii from their sixth-place finish in the men’s sculls at the 2008 Beijing Olympics, but in recent years the brothers have been in the news for a whole new reason: cryptocurrencies. Early Bitcoin adopters capitalized on the digital asset boom of the early 2010s before launching the cryptocurrency Gemini in 2014.

Tyler and Cameron Winklevoss compete on the first day of the Beijing 2008 Olympic Games, August 9.

Jonathan Ferrey – Getty Images

In late 2021, Gemini caught fire and cryptocurrency prices hit new record highs every day, leaving the same twins with a net worth of over $7 billion. Industry analysts claimed the party was just getting started, but the worm turned Winklevii after Crypto Winter wiped more than $2 trillion in value from the fledgling industry.

The lawsuits are now underway, and the brothers are locked in a very public battle with their former friend, crypto-billionaire Barry Silbert, over what will happen to the frozen funds of over 340,000 users of Gemini’s Earn platform.

The Facebook saga leads to early adoption

Hundreds of thousands of people around the world have been affected by Gemini’s recent troubles, and none of this would have been possible without Facebook.

In the early 2000s, Cameron and Tyler moved from a privileged upbringing in Greenwich – their father is Howard Winklevoss, a former actuarial science professor at the University of Pennsylvania’s legendary Wharton business school – and studied economics in the leafy suburbs. Harvard. Together with classmate Divya Narendra, they came up with the idea of ​​a social networking site called ConnectU to bring university students together and enlisted the help of sophomore Mark Zuckerberg to create their site.

Winklevii and Narendra claimed that Zuckerberg stole the idea to create Facebook. They sued in 2004, and after four years of litigation, eventually settled with the Meta CEO for $65 million in mediation.

The brothers used the settlement money to invest in dozens of startups through their family office, Winklevoss Capital, and also made a timely investment in Bitcoin, a then little-known digital token.

In April 2013, they announced that they had invested $11 million when Bitcoin was trading at just $120. A year later, they launched Gemini, a cryptocurrency exchange behind the investment, and everything was going according to plan until the Crypto Winter of 2022.

The birth of twins

in an interview with Luck Ahead of Gemini’s launch, Tyler Winklevoss outlined how he will lean toward regulation to make cryptocurrencies accessible to retail investors while also attracting the institutional crowd.

“Wall Street isn’t into Bitcoin yet, and part of Gemini and the license is to get them there,” he said.

The exchange has grown rapidly, weathered a brief period of turbulence in the bear market of 2018, and gained a reputation as a reliable option for crypto investors in the US. Winklevii became one of the first Bitcoin billionaires during the Gemini Rising.

But as the couple amassed fortunes as cryptocurrency craze grew, they also began to gravitate toward risky investments. Gemini launched the Nifty Gateway NFT marketplace in 2018, but the platform quickly ran into security issues and was overtaken by the competition before being integrated into Samsung’s NFT platform.

Cameron Winklevoss also said in September 2021 Luck of one — let’s call it unique — investing in a startup trying to revive woolly mammoths to fight climate change, he said he sees money coming in through TV commercials or “even like parks for extinct animals.” Jurassic park.”

Earlier that year, Winklevii had launched its most important business yet, the Gemini Earnings platform. The cryptocurrency lending service offered juicy returns of “up to 7.4%” for investing in cryptocurrency, promising that customers could withdraw their funds “at any time.” By comparison, the average savings account in the US today yields just 0.2%.

“Today’s investors know that a smart, diversified portfolio that includes cryptocurrency is an investment in their future selves,” Tyler Winklevoss said in a press release at the launch. “We’ve developed a program that allows our clients to make real returns on their cryptocurrencies without having to sell one of the best performing asset classes of the decade.”

Another victim of Crypto Winter?

The only problem for Gemini was that in order to offer high returns to investors, the company had to make relatively (or necessarily) risky bets on its customers’ crypto. In a bull market, this is not so difficult, but when prices start to fall, it can be difficult to find a stable income.

One of the ways the twins generated those returns was through Genesis Global Capital, the lending arm of crypto investment firm Genesis Global Trading, owned by Silbert’s Digital Currency Group. Gemini lent users’ funds to Genesis, which in turn lent them to institutional borrowers.

Winklevii was confident that cryptocurrency prices would continue to rise, allowing them to consistently offer high returns to customers through this plan. In September 2021, at the height of the cryptocurrency boom, Cameron Winklevoss even Luck that he believes Bitcoin will end the year at $100,000 (down from $47,000).

But in 2022, when cryptocurrency prices fell, it was a whole new world for Gemini and Winklevii, and Gemini Earn users were especially at risk. By June, Gemini was forced to cut 10% of its workforce. And a few months later, reports surfaced that the company would need to raise at least $1 billion to avoid bankruptcy for its Gemini Earn platform.

Matters got worse when Genesis decided to stop paying customers like Gemini following the collapse of FTX, once the world’s second largest cryptocurrency. The ruling stated that Gemini did not have the money to pay the proceeds or refund the funds on its Earning platform.

In an open letter to Silbert this week, Cameron Winklevoss said more than 340,000 users have more than $900 million in cryptocurrency in Silbert’s Genesis Global Capital, and that in total, Silbert’s companies owe Gemini $1.675 billion. He argued that Silbert engaged in “malicious stall tactics” to keep customers from paying.

“The idea that you can hide quietly in your ivory tower and this will all magically go away or that it’s someone else’s problem is pure fantasy,” he wrote.

Barry Silbert
Barry Silbert, founder and CEO of Digital Currency Group

Joe Buglewicz – Bloomberg/Getty Images

Silbert responded by saying he had not borrowed $1.675 billion and had “never missed an interest payment.” Some critics argued that the collapse was inevitable because of the unstable returns offered by Gemini. BlockFi, another cryptocurrency lender offering high returns to investors, filed for bankruptcy in November amid the collapse of Crypto Winter and FTX.

However, Cameron Winklevoss said he is trying to refund customers, but is unable to do so because of Silbert.

“There you go again,” he said. “Don’t try to pretend that you and DCG are innocent bystanders and had nothing to do with creating this mess. This is completely insincere.”

Winklevoss asked if Silbert would commit to paying back $1.1 billion in debt by Jan. 8, but he got no response.

Now, Gemini’s Earn users are suing the Silbert and Winklevoss twins, alleging that Silbert breached their contract by withholding payments and that the Winklevii sold interest-bearing accounts without properly registering them as securities.

The Commodity Futures Trading Commission (CFTC) sued the twins in 2017 for misrepresenting how swaps and futures contracts worked when they sought approval from the regulator.

Gemini’s main business, cryptocurrency, is currently in danger of losing its relevance. During the last 24 hours, the spot trading volume of the exchange was only 32.8 million dollars. For comparison, Binance, the world’s leading cryptocurrency, had a volume of more than $8.3 billion during the same period.

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