Gemini Withdrew Millions from Genesis Before Collapse
Gemini, a cryptocurrency exchange, withdrew $282 million from Genesis to establish a liquidity reserve for Gemini Earn users.
Gemini, a cryptocurrency exchange, recently came into the spotlight for its decision to withdraw a substantial amount from Genesis, a crypto lender that later declared bankruptcy.
Genesis, a crypto lender owned by the Digital Currency Group (DCG), faced challenges leading to its bankruptcy. The downfall of the crypto exchange FTX in November 2022 played an essential role in Genesis' struggles. By September 15, Genesis announced the cessation of its global trading services.
Gemini made a strategic decision in August 2022. The exchange withdrew $282 million worth of crypto from Genesis, a move that occurred just five months before Genesis' lending arm filed for bankruptcy on January 20th. According to reports, this withdrawal was aimed at establishing a reserve to ensure sufficient liquidity for Gemini Earn customers.
Gemini's official statement provided clarity on this move, highlighting that the funds were held back as part of the "Gemini Earn Program Terms," which allowed the establishment of a "liquidity reserve" for the benefit of Earn users. Gemini's official statement states:
“The Gemini Earn Program Terms permitted Gemini to establish a “liquidity reserve” for the benefit of Earn users by holding back a portion of the money they deposited into the Earn program. Amidst the broad market turmoil in the summer of 2022, we decided to increase the liquidity reserve."
“As a result, we pulled back $282 million of Earn users’ funds from Genesis on August 9, 2022 and held those funds in the liquidity reserve for their benefit. In hindsight, this proved to be a wise and prudent decision. As a result of our risk management, Earn users had $282 million less exposure to Genesis when Genesis halted redemptions on November 16, 2022."
Cameron and Tyler Winklevoss, commonly known as the "Winklevoss twins," are the co-founders of Gemini. Sources have clarified that neither of the twins personally received any of the withdrawn money.
Gemini has been vocal in its opposition to Genesis' bankruptcy plan. The exchange has raised concerns about the lack of clarity in the liquidation plan, terming it as "woefully light" on specifics. In recent court filings, Gemini emphasized that the plan complicates the creditors' ability to understand the payment process. Cameron Winklevoss has been particularly vocal, addressing DCG's CEO Barry Silbert and challenging alleged inaccurate statements made by him.
“You’ve got to be kidding me, When a company you own says you wrote a $1.1 billion dollar check that you know you didn’t write, yes, you have a duty to correct this."