As a preamble, Genesis partnered with Gemini on Gemini's Earn program. Last November, Genesis halted withdrawals on the program. Barry Silbert, the head of DCG who is the parent company of Genesis, said the halt “was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion”. We immediately had a problem here. Because Genesis(through DCG) blamed the halt on the market, as opposed to just allowing people to withdraw their money. The founders of Gemini, the Winklevoss twins, did indeed accuse Silbert of making “false statements and misrepresentations about the solvency and financial health of Genesis”, going so far as to accuse them of accounting fraud.
It was then later on we discovered the fact, Genesis lost $175M when FTX collapsed. We also learned Genesis lost $1.2B in the collapse Three Arrows Capital. This left around 340,000 users of the Gemini Earn program unable to withdraw and the accounts short of a collective $900,000. If they was the end of the story that would have not been so bad….but it isn't. See, while FTX apparently owned Genesis $175M, FTX has now laid claim to $3.9B from Genesis as mostly an attempt of clawbacks. FTX said “Genesis was one of the main feeder funds for FTX and instrumental to its fraudulent business model.” It is certainly…interesting to see FTX calling anyone else a fraud.
In addition to all this, Genesis and Gemini are facing a sizable fine from the SEC for unregistered securities offerings which will easily amount in the multi-millions. So Gemini Earn are owned 900 Million, which Genesis and DCG clearly do not have as even when FTX collapsed DCG could only give them around 120M of the 175M they lost. DCG also previously promised 1.1 Billion to Genesis to cover the 1.2 Billion they lost with Three Arrows, however Winklevoss calls this “complete gimmick” that did nothing to help Genesis. DCG also failed to make a scheduled $630 million loan payment to Genesis which Winklevoss says was a ploy to obtain “infinite forbearance” on the loan, that is, basically never pay it. They are down $1.3 Billion (from Three Arrows + Gemini Earn) and are facing a further 3.9 Billion loss from FTX's claims, on top of how much ever the SEC fine amounts to.
Winklevoss has now sued DCG after promising to do so if DCG does not agree to Gemini’s proposal of what he calls a “Final Offer” to pay a near $1.5 billion settlement to Gemini Earn customers by the end of this week. Barry Silbert also has refuted Winklevoss' claims at every turn.
And out of all of this, the retail customers will probably be the ones holding bags.
TLDR: Gemini owes customers almost 1 Billion. Customers say Gemini is a fraud company. Gemini claims Genesis owes at least 1.5 Billion. Now Genesis is a fraud. FTX owes Genesis millions, but FTX claims Genesis owes 4 Billion through clawbacks. FTX calls Genesis a fraud and FTX…well we know. DCG apparently “owes” Genesis 1.1 Billion but has failed to make at least 600M of the payment. DCG is apparently also a fraud.