DCG and Gemini management are arguing, and the relationship between the two sides is becoming increasingly tense

As the respective management of Digital Currency Group (DCG) and Gemini continue to accuse each other, the conflict between the two parties continues to escalate. DCG CEO Barry Silbert has released an open letter to the company's shareholders to respond to Gemini co-founder Cameron Winklevoss's attack on him and provide more information about DCG and Genesis (a DCG subsidiary).

DCG and Gemini have been arguing over the freezing of Gemini Earn user funds for nearly two months. Previously, Winklevoss asked Silbert to publicly commit to resolving the issue before January 8, but nothing happened that day.

Yesterday, Winklevoss sent an open letter to the DCG board of directors, calling for the removal of Barry Silbert as CEO and the appointment of a new CEO. Winklevoss claimed that Silbert had been lying and "pretending" that DCG had filled the $1.2 billion hole in Genesis' $8 billion loan book caused by Three Arrows Capital.

Cameron and Tyler Winklevoss, co-founders of Gemini

In response, Silbert also published an open letter. He said, "The past year has been the hardest of my life - both personally and professionally. I have spent a decade giving everything to this company and this space, relentlessly doing things the right way, and it is challenging to have my integrity and good intentions questioned."

Then, Silbert used Q&A to explain the issues about DCG and Genesis. "DCG has not guided any transactions, loans or borrowings in the Genesis business." He said that DCG currently owes Genesis's loan department Genesis Capital $447.5 million and 4,550 $BTC, and these loans will mature in May 2023. Previously, Winklevoss said DCG borrowed $1.675 billion from Genesis.

Silbert said that in order to protect Genesis, DCG decided to assume the claim against 3AC and issued a $1.1 billion promissory note due in 2032 to Genesis in exchange for the unsecured loan that Genesis was supposed to recover from Three Arrows. Silbert said: "DCG actually assumed Genesis' losses on the Three Arrows loan, even though it had no obligation to do so." However, according to Winklevoss, DCG's support for Genesis was an "accounting fraud" because the promissory note was not a current asset and its current value was only about $300 million.

Barry Silbert, founder and CEO of DCG

Silbert also explained that DCG has never had a relationship with Three Arrows, Alameda, or Celsius. In July 2021, DCG made a small equity investment of $250,000 in FTX's Series B round and held a trading account at FTX, but its trading volume was less than 1% of all its trading volume on the platform. However, Silbert said Genesis has trading and lending relationships with both Three Arrows and Alameda.

In addition, Silbert denied that DCG and its wholly-owned subsidiaries had mixed assets. It was previously reported that the Eastern District of New York (EDNY) was investigating DCG's internal loans. In response, he said, "DCG is not aware of and has no reason to believe that EDNY has investigated us."

While Silbert did not directly hit back at Winklevoss in his open letter, the DCG official Twitter account took a tougher stance. The account commented on the Gemini co-founder's open letter: "This is another desperate and unconstructive marketing ploy by Cameron Winklevoss to deflect responsibility from himself and Gemini. They are solely responsible for operating Gemini Earn and marketing it to customers."

"We reserve the right to pursue legal remedies in response to these malicious, false and defamatory attacks. DCG will continue to engage in productive dialogue with Genesis and its creditors to reach a resolution that works for all parties."

Gemini, on the other hand, has taken action to terminate its customer loan agreement with Genesis. “This formally terminates the Earn program and requires Genesis to return all outstanding assets in the program,” Gemini said in an email to customers.