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Tether’s USDT Shorting Scheme Exposed

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Tether CTO Paolo Ardoino recalled a situation in the past when hedge funds attempted to short USDT on secondary markets. Shorting is betting against a token with the expectation that its value will decrease. The intention of these hedge firms, according to Ardoino, was likely to create a scenario of a bank run where Tether faces bankruptcy and the USDT value plummets. But as per Ardoino, this strategy failed to have its desired impact. Instead, he claimed that it proved Tether’s resiliency during the crypto meltdown.

Remember when many hedge funds shorted $USDt on secondary markets, trying to cause a bank run? Their only result was proving Tether’s resiliency, while almost the rest of the crypto industry was melting down. Tether was able to redeem and pay 7B USD in 48 hours and more than 20B USD in less than one month. Shorting USDt proved to be an idea as brilliant as accepting FTT as collateral. Misery loves company.

Ardoino’s post referenced the controversial move by Digital Currency Group [DCG], whose founder Barry Silbert once reportedly tried to short USDT stablecoin and unsuccessfully pitched a merger of his Genesis Global with rival Gemini, per court filings. DCG is now battling against its former subsidiary and NYAG.

Tether
Tether's USDT Shorting Scheme Exposed 2

As earlier reported by TronWeekly, DCG alleged unfair play in the recent settlement case between its subsidiary Genesis and the New York Attorney General [NYAG]. According to the then court filing, DCG argued that Genesis had violated U.S. bankruptcy law “by taking value from the underclass and redistributing it to senior creditors under the garb of settlement.”

Tether CTO Mocks DCG

DCG and Silbert each filed separate motions to dismiss the fraud complaint filed against them by New York Attorney General [NYAG] Letitia James. The regulator also amended its original complaint to include new fraud allegations against DCG, its CEO, Barry Silbert, and Genesis. The alleged fraud at Gemini Trust and Barry Silbert’s Digital Currency Group was three times bigger than initially thought, the New York attorney general said in the revised civil complaint.

Amidst the legal entanglement, Tether CTO mocked DCG’s tactic to short USDT, which proved to be as unsuccessful as accepting FTT [FTX native token] as collateral. The largest stablecoin by market value recently expanded its support on the mobile-focused layer-1 platform, Celo. Committed to keeping USDT accessible and secure, the leading issuer has also built a robust blockchain recovery plan.

DCG Fights Back: Alleges Unfair Play in Genesis Settlement

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Digital Currency Group, or DCG, has alleged unfair play in the recent settlement case between its subsidiary Genesis and the New York Attorney General [NYAG]. According to the recent filing, DCG contended that Genesis has violated U.S. bankruptcy law “by taking value from the underclass and redistributing it to senior creditors under the garb of settlement.”

Earlier this month, Genesis Global negotiated a resolution with the attorney general’s office to resolve allegations that it duped investors. NYAG filed a lawsuit against Genesis, DCG, and its officials, alleging fraud charges totaling more than $1.1 billion in October last year.

Jason Brown, a former co-chief deputy in the Attorney General’s Office, also threw his weight behind DCG’s opposition, claiming in court filings that the details of the settlement may not have been properly finalized, calling it a “cowardly attempt to circumvent U.S. bankruptcy law” in a court filing.

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DCG Fights Back: Alleges Unfair Play in Genesis Settlement 4

A few weeks ago, DCG criticized Genesis for handing out excess payouts to its customers. The bankrupt lending firm is working on its liquidation plans after failing to reach settlements with DCG, its former business partner Gemini, and regulators suing the three companies over their business practices.

In response, its parent firm argued that “it cannot support a plan that is unlawful and deprives of its corporate governance rights” and asserted that it would continue to fight against the New York prosecutors’ claims while ensuring that funds are recovered under bankruptcy regulations.

DCG’s Fate On Feb 26

The bankruptcy court is set to consider the NYAG settlement on February 26. The regulator also amended its original complaint to include new fraud allegations against DCG, its CEO, Barry Silbert, and Genesis. The alleged fraud at Gemini Trust and Barry Silbert’s Digital Currency Group was three times bigger than initially thought, the New York attorney general said in the revised civil complaint.

Previously, Genesis, a crypto brokerage firm, also settled with the U.S. Securities and Exchange Commission [SEC], bringing an end to a year-long legal battle concerning its Earn product. The company agreed to pay a $21 million civil penalty to resolve the litigation and benefit the debtors’ estates.

DCG & Genesis Global Settle $620M Dispute

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Digital Currency Group [DCG] and its bankrupt subsidiary Genesis Global have reportedly reached a settlement agreement to address their legal dispute, as indicated by a recent filing. In early September, the crypto brokerage firm initiated a lawsuit against DCG, accusing them of wrongfully holding more than $620 million in loans during Genesis’ bankruptcy proceedings and seeking repayment along with interest and fees. Up to this point, DCG has made payments totaling more than $220 million out of the $620 million owed.

The settlement terms entail DCG making an additional payment of $275 million to the crypto broker in three installments, partly in U.S. dollars and bitcoin, with the final installment due by April. The agreement also includes an upfront payment of $35 million and a $10 million holdback from the recent sale of CoinDesk. According to the filing, DCG is using Grayscale Trust shares as collateral.

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DCG & Genesis Global Settle $620M Dispute 6

While the settlement won’t fully satisfy the debt, as DCG’s total owed amount stands at $324.5 million, it is designed to prevent protracted and costly legal proceedings between the two entities. The plan could result in a 70%–90% recovery for unsecured creditors. However, the approval of creditors is still required for the deal to proceed.

Genesis Clash With DCG

As mentioned earlier, Genesis Global Capital had filed a lawsuit against its parent firm Digital Currency Group, and Digital Currency Group International [DCGI], seeking repayment of multiple loans. The legal filings made public in early September alleged that DCG borrowed up to $500 million across four loans from Genesis in 2022, and DCGI borrowed 18,697.7 BTC in 2019.

Both the warring parties entered into master loan agreements in November of the previous year, with extended or normal maturity dates in May 2023. DCGI, a subsidiary of DCG, also entered into a master loan agreement with Genesis in 2019. Genesis, having filed for bankruptcy in January, contends that DCG and DCGI are in wrongful possession of property belonging to Genesis Global Capital’s bankruptcy estate, according to the filings made on Wednesday.

Gemini Files Lawsuit Against DCG & Barry Silbert; DCG Denies Allegations

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Gemini, the popular cryptocurrency exchange founded by the Winklevoss twins, has filed a lawsuit against Digital Currency Group (DCG) and its founder, Barry Silbert. The lawsuit alleges that DCG and Silbert were involved in fraudulent activities related to the Gemini Earn program and the Genesis bankruptcy case.

According to Cameron Winklevoss, co-founder of the company, Silbert was not only the mastermind behind the fraud committed against creditors but was also directly involved in perpetrating it. Winklevoss took to Twitter to express his frustration, stating that the lawsuit tells the whole story of the deception.

The complaint lodged by the company reveals that Silbert, aware of Genesis’s massive insolvency, attempted to persuade Gemini to continue the Earn program despite the impending termination. 

It is alleged that Silbert misled the company by claiming that Genesis was only facing a timing issue, concealing the true extent of the financial crisis.

Furthermore, the company accuses DCG of providing false financial reports to hide fraudulent activities. A promissory note, presented as a “Current Asset” worth $1.1 billion, was exposed as a sham, with a mere 1% interest rate. 

The balance sheet manipulation and excluding the promissory note from calculations were additional efforts to deceive Gemini and other creditors.

Gemini’s lawsuit claims that the fraud involved high-ranking executives at DCG, including Mark Murphy, who was copied on disseminating fake financial reports. Murphy allegedly failed to correct the reports despite knowing they contained false information regarding DCG’s financial support for Genesis.

DCG Denies Allegations; Calls Gemini’s Lawsuit A Publicity Stunt

In response to the lawsuit, DCG released a statement dismissing the allegations as baseless and defamatory. They labeled the lawsuit a “publicity stunt” by Cameron Winklevoss to deflect blame from himself and Gemini. 

DCG emphasized its commitment to reaching a fair resolution for all parties involved in the Genesis bankruptcy case.

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However, as the mediation process approaches its conclusion, both Gemini and DCG await the handling of the case under Chapter 11 bankruptcy law. 

The outcome of this legal battle will have significant implications for the reputation and future of both parties involved, as well as for the thousands of users affected by the Genesis bankruptcy.

Related Reading | Gemini’s Cameron Winklevoss Issues Final Ultimatum To Barry Silbert & DCG

Gemini’s Cameron Winklevoss Issues Final Ultimatum To Barry Silbert & DCG

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Cameron Winklevoss, the co-founder of cryptocurrency exchange Gemini, has fired off a fiery open letter to Barry Silbert, the founder of Digital Currency Group (DCG), on behalf of the 232,000 Earn users with over $1.2 billion of assets trapped in the troubled Genesis company.

Winklevoss didn’t hold back, accusing DCG of engaging in fraudulent behavior under Silbert’s leadership and orchestrating a culture of lies and deceit. 

The letter highlighted the alleged falsification of balance sheets and documents to perpetuate an accounting fraud, all to hide Genesis’ insolvency.

Despite a history of open letters, Winklevoss asserts that Silbert has consistently avoided responsibility and genuine resolution with creditors and Earn users since the withdrawal gates were closed. 

The recent mediation process, which was expected to bring about a solution, has instead granted DCG a gratuitous forbearance on the $630 million owed to Genesis. 

This indefinite delay has caused the ballooning of professional fees to over $100 million, borne by creditors and Earn users.

Gemini Winklevoss Outlines Best & Last Chance For Resolution

In an effort to bring this ongoing crisis to a close, Winklevoss issued a final ultimatum to Silbert and DCG. The letter outlined a best and final offer that creditors are prepared to accept, demanding a response by 4 pm ET on July 6th. 

If DCG fails to agree, Winklevoss stated that Gemini would take legal action, filing a lawsuit against DCG and Silbert personally on July 7th.

The lawsuit will expose Silbert’s alleged role in hiding Genesis’ insolvency and outline his personal liability. Furthermore, Winklevoss intends to advance a non-consensual plan to provide immediate distributions to creditors and Earn users while litigating DCG’s contribution.

Winklevoss also urged the Genesis Special Committee to fulfill its fiduciary duties by filing a turnover motion, putting DCG into default, and demanding immediate payment of the $630 million owed to creditors and Earn users.

Throughout the letter, Winklevoss expressed deep frustration with Silbert’s perceived lack of self-awareness and refusal to acknowledge the harm caused to Earn users and creditors. He implored Silbert to recognize the gravity of the situation and to finally do the right thing.

However, the cryptocurrency community awaits Silbert’s response and the potential fallout from Winklevoss’ ultimatum. This high-stakes confrontation between Gemini and DCG could have far-reaching implications for the cryptocurrency industry and the millions of dollars at stake.

Related Reading | Binance.US Escapes Temporary Restraining Order, Spot Trading Volume Plummets 70%

DCG Denies Involvement In Genesis Capital Bankruptcy Filing

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In a bombshell announcement, Genesis Capital, a Digital Currency Group (DCG) subsidiary, filed for Chapter 11 bankruptcy protection in the Southern District of New York on January 19th. The news sent shockwaves through the financial industry, with many scrambling to understand the implications of this move.

However, in a swift response to the news, DCG released a statement denying any involvement in the bankruptcy proceedings. According to the company’s statement, the decision to file for bankruptcy was made by the independent management team, legal counsel, and financial advisors of Genesis Capital.

The management team is solely in charge of the restructuring process and made the decision to file for bankruptcy. Furthermore, it was clarified that none of the employees or board members of DCG were involved in the said decision.

The company reassured shareholders that operations continue to operate as usual, as will its other subsidiaries, including those of its subsidiary Genesis Global Trading, Inc., which handles spot and derivatives trading, will proceed without interruption.

According to the statement, DCG has a debt of $526 million that is due in May 2023 and $1.1 billion in a promissory note that is due in June 2032 to Genesis Capital. DCG plans to address these obligations as part of its restructuring process and is working with Genesis Capital and other creditors to find a mutually beneficial solution.

However, the bankruptcy filing of Genesis Capital has sent ripples through the financial industry. Many are now wondering how this situation will play out and what it could mean for investors and shareholders. Nevertheless, DCG is determined to find a solution that works for all parties involved.

Genesis Bankruptcy May Impact DCG

The move has raised concerns about the stability of the industry as a whole and has led to speculation about the potential impact on Digital Currency Group (DCG), one of the largest players in the crypto space.

According to a report, the bankruptcy filing is the result of a series of missteps by Genesis and its management team, including aggressive behavior and a failure to adhere to principles of financial prudence when lending. 

Gemini, another major player in the crypto lending space, is also believed to be partly responsible for the bankruptcy filing, with some accusing the firm of evading its own responsibility for the situation.

The bankruptcy filing is not an isolated incident, with several other lending platforms also facing similar financial difficulties. Experts believe that this is indicative of deeper problems within the industry and that there may be a widespread trend of bankruptcies among crypto lending platforms.

The situation has also led to a power struggle among various players within the industry, with many vying for control and revenue ownership of DCG and Grayscale, two of the largest players in the crypto space. 

Some have even accused these companies, along with Genesis, 3AC, and other firms, of forming a conspiracy to help DCG and Grayscale grow at the expense of other players in the industry.

The revelation of these issues has caught the attention of regulators, who may now be closely scrutinizing the actions of these companies. This could potentially affect the future trend of the crypto market and may lead to stricter regulations and oversight in the industry.

Overall, the bankruptcy filing of Genesis is a major blow to the crypto lending industry and raises serious questions about the stability and integrity of the sector as a whole. With more bankruptcies expected to follow, it remains to be seen what the future holds for the crypto lending industry and its players.

Related Reading | Genesis’ “Mega” Bankruptcy Filing Has Liabilities Upto $11B

Genesis’ “Mega” Bankruptcy Filing Has Liabilities Upto $11B

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Crypto lender and DCG subsidiary Genesis has filed Chapter 11 bankruptcy in the federal court of Manhattan. With this, the crypto firm has become the latest to crumble in the FTX contagion and a heavy blow to the empire of DCG boss Barry Silbert.

The crypto broker cited over 100,000 creditors in a “mega” bankruptcy case, with total obligations ranging from $1.2 billion to $11 billion., as per the bankruptcy documents.

According to reports, Genesis filed three separate petitions. One of the statements mentioned that its derivatives and spot trading, broker-dealer, and custody businesses are not included in Chapter 11 and would continue client trading operations.

Under the Chapter 11 plan, the firm contemplates potential sale and equitization transactions to enable the lending business to emerge under new ownership.

Board member at Genesis, Derar Islim, who was appointed as the firm’s interim CEO in August 2022, send out a statement:

While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all its stakeholders.

According to the press release, the firm also announced a restructuring of the lending business to advance ongoing stakeholder discussions further and optimize outcomes for both Genesis clients and Gemini Earn users.

Genesis Bankruptcy Filing Would Speed Up Funds Recovery- Gemini CEO

It needs to be told that Genesis’s parent firms DCG and Gemini were engaged in negotiations after the formerly suspended customer withdrawals in the aftermath of the FTX collapse.

Moreover, the platform-owned high-yield savings product Gemini Earn $900 million. 

According to reports, Genesis has $175 million of its assets locked in the bankrupt FTX. and is estimated to owe creditors $3 billion.

Responding to the latest news, Gemini co-founder Cameron Winklevoss tweeted that Genesis’s bankruptcy filing was a crucial step towards recovering customers’ assets.

“Bankruptcy court provides a much-needed forum for that to happen. Sunlight is the best disinfectant”, he added.

DCG Subsidiary Genesis Preps Up To File Bankruptcy

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DCG’s subsidiary Genesis might soon file bankruptcy and is reportedly in talks with creditors, according to a Bloomberg report.

The development follows after its parent firm Digital Currency Group [DCG], informed its shareholders of suspending dividends until further notice. In a letter sent to its shareholders on 18 Jan., the venture firm stated,

In response to the current market environment, DCG has been focused on strengthening our balance sheet by reducing operating expenses and preserving liquidity. As such, we have made the decision to suspend DCG’s quarterly dividend distribution until further notice.

Crypto conglomerate DCG has found itself in a tough financial spot at its once-prolific lending platform Genesis. Barry Silbert, the business’s owner, has been engaged in negotiations with billionaires Cameron and Tyler Winklevoss.

The duo-led crypto exchange Gemini offered a lending product that fell apart because Genesis, its partner, suspended customer withdrawals.

Back in November, Genesis halted withdrawals following the collapse of the crypto exchange FTX. And the platform owes high-yield savings product Gemini Earn $900 million. 

According to reports, Genesis has $175 million of its assets locked in the bankrupt FTX. and is estimated to owe creditors $3 billion.

Genesis’ Assets To Get Diluted

As its parent business Digital Currency Group came under increasing pressure, the CEO of the cryptocurrency broker asked for more time to sort out its problematic lending operation.

Both Gemini and Genesis were recently involved in a bitter public showdown after the former co-founder Cameron Winklevoss issued an open letter to DCG CEO Barry Silbert accusing him of “bad faith stall tactics.”

He claimed his firm has tried to work out a solution to getting the cash back but was unsuccessful, as reported by TronWeekly.

That said, the exact implication of a Genesis bankruptcy filing on DCG investors is now unknown, but at the very least, they will witness a diluting of their interests, according to a story in The Information.

SoftBank, one of the investors in DCG, wiped off a $100 million interest in the defunct FTX in November. Others include the CapitalG growth fund from Alphabet, Bain Capital, and Ribbit Capital.

In addition, DCG-owned crypto media outlet CoinDesk confirmed with Bloomberg that it is exploring options of partial or full sale with New York-based Lazard as a financial adviser.

Gemini Founder Accuses Genesis of Concealing $1.2B Loss in Open Letter

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In a recent open letter, the founder of Gemini accused the Genesis trading platform of losing $1.2 billion in the 3AC accident and concealing the loss from both Gemini and Digital Currency Group (DCG) users.

The letter also called for the removal of Barry Silbert from his position as head of Genesis and for a new leadership team to be put in place.

Cameron Winklevoss, CEO of Gemini, alleged that Silbert’s trading platform had loaned $2.36 billion in assets to a hedge fund that failed, resulting in a loss of at least $1.2 billion. He accused Silbert of not taking proper action to address the loss, either through restructuring or filling the deficit.

When the loss from 3AC occurred, the total amount of loans held by Genesis was approximately $8 billion. Therefore, the $1.2 billion loss from 3AC represented approximately 15% of the total assets in the loan book.

According to the letter:

Beginning in early July 2022, Barry, DCG, and Genesis embarked on a carefully crafted campaign of lies to make Gemini, Earn users, and other lenders believe that DCG had injected $1.2 billion of actual support into Genesis. 

Genesis & Its Open Lies

Winklevoss’s open letter pointed out a number of lies, which some are, on July 6th, Michael Moro, who was the CEO of Genesis at the time, tweeted that DCG had assumed certain liabilities of the trading platform related to 3AC to ensure that they had the capital to operate and scale the business for the long term.

However, in the open letter, Winklevoss alleges that this statement was “false and misleading” and that DCG had not provided any funding to Genesis to ensure that it could operate.

In internal communications, several individuals involved lied and covered up the truth about the extent of the losses from 3AC in both of Silbert’s companies.

For example, the Head of Trading and Lending of the trading platform sent an email with a document titled “Three Arrows Post-Mortem” to multiple Gemini employees.

The document falsely stated that the losses were absorbed by DCG, leaving the platform with adequate capitalization to continue business as usual. But it’s said by Winklevoss that, in reality, DCG had not absorbed the 3AC losses on its balance sheet.

In the end, the founder of Gemini demanded:

the Board remove Barry Silbert as CEO, effective immediately, and install a new CEO, who will right the wrongs that occurred under Barry’s watch. Genesis lenders, including Earn users, have been seriously harmed and deserve a resolution for the recovery of their assets

Related Reading | Seeking Plea Bargains: Former FTX Engineering Chief Talks to U.S. Federal Prosecutors

DCG & Genesis Under Investigation By US Authorities: Bloomberg’s Report

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US authorities are reportedly investigating the financial dealings of Digital Currency Group (DCG) and its subsidiary Genesis which offers crypto lending services, Bloomberg reported on January 6th, citing people familiar with the matter told.

The person requested anonymity because the investigation has not been publicly disclosed. He told Bloomberg that Federal prosecutors in Brooklyn are examining the transfers between DCG and its subsidiary, as well as the information provided to investors about those transactions.

Additionally, according to the report, Federal prosecutors and the Securities and Exchange Commission are investigating Digital Currency Group and its subsidiaries. The probes are in the early stages, and no wrongdoing has been alleged.

This action was taken shortly after DCG revealed that it had to shutter its wealth management division, known as HQ, by the end of the month. It is due to the persistent bear market in cryptocurrency and the difficult economic climate, as reported by TronWeekly. Additionally, Genesis’ brokerage division was cutting off almost 30% of its workforce. 

Whereas DCG’s founder, Barry Silbert, has recently faced public disputes with Gemini’s founder Cameron Winklevoss. Winklevoss has accused Silbert of delaying efforts to resolve the issue and claimed that his companies are “beyond commingled.”

DCG And Genesis In Trouble

According to Bloomberg, a DCG spokesman was directed by Silbert to respond to a comment request and claimed:

DCG has a strong culture of integrity and has always conducted its business lawfully. We have no knowledge of or reason to believe that there is any Eastern District of New York investigation into DCG.

On the other side, Genesis stated that it does not comment on specific legal or regulatory matters but maintains regular communication with regulatory bodies when it receives inquiries.

Furthermore, none of the legal authorities have yet commented. However, Bloomberg stated, “it’s unclear specifically which intercompany activity is drawing scrutiny.”

Nevertheless, according to a report by Bloomberg, the investigation into Barry Silbert’s business empire began before the recent problems at cryptocurrency exchange FTX, in which Silbert is also involved. This information comes from a source familiar with the criminal probe.