Gemini mulled forming a ‘juggernaut’ with Genesis before it went to smoke

    2024.03.08 | exchangesranking | 123onlookers

    Gemini co-founder Cameron Winklevoss once considered a merger with Digital Currency Group (DCG) and its cryptocurrency lending firm Genesis Global Capital (GGC) that could’ve birthed a publicly-listed “juggernaut” to compete with the likes of Coinbase and FTX.

    That was, at least, a claim by DCG’s CEO Barry Silbert in a newly surfaced email to colleagues from October 2022 after a luncheon with Winklevoss — three months before Genesis eventually went bankrupt.

    The email was shared by lawyers representing DCG and Barry Silbert as part of a March 6 motion to dismiss a $3 billion fraud lawsuit filed by the Attorney General of the State of New York. The email was used to argue against allegations that Silbert knew Genesis was insolvent and believed it should be hidden from counterparties.

    The email was used to argue against allegations that Silbert knew Genesis was insolvent and believed it should be hidden from counterparties, with lawyers arguing that Silbert's actions show the opposite.

    “He is intrigued about the idea of a closer partnership between Genesis/Gemini/DCG, including a potential merger of the companies,” wrote Silbert.

    Silbert said the merger would be “super exciting to investors,” and a potential $1 billion raise could lead to a public listing within 24 months.

    “Combined Gemini and Genesis would be a juggernaut,” Silbert reportedly pitched to Winklevoss, adding that it would be “competitive with Coinbase and FTX” and that Gemini could become the largest cryptocurrency custody provider in the world.

    An email sent from DCG’s CEO Barry Silbert about a potential merger with Gemini. Source: DCG

    At the time of the lunch, the two firms had been closely intertwined in a cross-platform lending partnership for 18 months. GGC, however, was facing “hundreds of millions in losses” from overexposure to the now-collapsed Three Arrows Capital.

    Silbert also wrote he was honest with Winklevoss about GGC’s financial woes, which were received rather well:

    “I put him on clear notice [...] He took that part surprisingly well and appreciates we need to work together to mitigate that risk.”

    He also stressed to colleagues that Genesis had to do whatever possible to “avoid a bank run,” or else it would be “difficult, if not impossible,” for the firm to find replacement liquidity

    “I cant raise money at DCG if there is a Genesis bankruptcy risk. So the ball is in their court to prevent a bad thing from happening.”

    Silbert told his colleagues that Winklevoss would go back to his twin brother Tyler Winklevoss and come back with thoughts on “how to best proceed.”

    Ultimately, the merger never went through.

    Related: Gemini to return at least $1.1B to Earn customers in settlement with NYDFS

    Gemini launched its “Earn” program in February 2021 where customers would loan their coins to GGC in exchange for interest payments.

    However, that endeavor crossed a point of no return one month after the email when GGC halted withdrawals — including those from Gemini’s Earn program — citing “unprecedented market turmoil” stemming from FTX’s shock collapse.

    GGC then fell bankrupt in January 2023, owing $1.2 billion to Gemini’s 232,000 Earn customers.

    Since then, Winklevoss has threatened to sue Silbert on several occasions and has called him out for engaging in “fraudulent behavior” via a “culture of lies and deceit.”

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