Venture capital firm Digital Currency Group (DCG) has filed a motion to dismiss a lawsuit brought by cryptocurrency exchange Gemini that alleged fraud related to its Earn program.
In an Aug. 10 filing with the United States District Court for the Southern District of New York, lawyers for DCG and its CEO, Barry Silbert, alleged Gemini’s lawsuit filed in July was a “continuation of [a] public relations campaign” targeting the firm on social media with “personal, vicious, and false” claims. The filing echoed Gemini’s complaint, in which the crypto exchange said it sought to recover funds incurred as a result of “DCG’s and Silbert’s false, misleading, and incomplete representations and omissions to Gemini” and their role “in encouraging and facilitating Genesis’s fraud against Gemini.”
Genesis, a DCG subsidiary, had been the crypto lender responsible for operating an Earn program launched in 2021 in partnership with Gemini. The program claimed Gemini users could loan crypto to Genesis with the promise the firm would repay it with interest. However, the firm halted withdrawals in November 2022, citing “unprecedented market turmoil,” and filed for Chapter 11 bankruptcy in January 2023.
According to the DCG filing, Silbert and the firm “had virtually nothing to do with the Gemini Earn program,” and Gemini could largely not back up its claims of fraudulent activity:
“[T]he Complaint is a hodgepodge of conclusory allegations against non-defendant Genesis, all belied by the fact that Gemini has not filed these spectacular claims in the Genesis bankruptcy.”
The collapse of Three Arrows Capital in 2022 reportedly left Genesis with $1.2 billion of funds in limbo amid bankruptcy proceedings. Cameron and Tyler Winklevoss, the co-founders of Gemini, have claimed that Genesis and DCG owed $900 million to the exchange’s clients.
Both Gemini and Genesis are facing a civil suit from the U.S. Securities and Exchange Commission brought in January over its Earn program. The regulator claims the program offered the sale of unregistered securities. New York State’s Department of Financial Services is also reportedly investigating the exchange over similar allegations.