NEW YORK, July 11 (Reuters Breakingviews) – Tyler and Cameron Winklevoss have kept busy since their 2008 feud with Mark Zuckerberg over who came up with the idea for social network Facebook. The twins took a $65 million settlement from that spat, invested some in bitcoin, launched a cryptocurrency exchange and even went on tour as a musical duo covering songs by the likes of Blink-182. But the music stopped last year as the cryptocurrency industry lost over $1 trillion in value – and the twins have once again found themselves at the mercy of technology’s latest hype cycle.
The Winklevii, as they came to be known after “The Social Network” movie debuted, are suing another former friend – crypto baron Barry Silbert. The two parties have been feuding since Genesis, a subsidiary of Silbert’s conglomerate Digital Currency Group, froze withdrawals last November. Its biggest creditor? The unfortunately named Gemini, founded by the Winklevii.
Gemini claims it gave nearly $1 billion of its own customers’ money to Genesis to lend, hoping Genesis could help fuel 7%-plus returns that had been promised to investors. Genesis, which filed for bankruptcy in January after making some risky bets, still owes creditors, including Gemini, over $3 billion, according to court filings.
The Winklevii’s suit filed last week accuses Silbert and Genesis of misleading investors, and claims it used accounting tricks to try to cover up a hole in the parent company’s balance sheet. DCG has denied the allegations. Already, Gemini customers are seeking damages from both Genesis and Gemini over the fiasco, as are regulators.
While the Winklevii duke it out alongside other fallen crypto firms, other parts of the industry appear to be growing up and rocking on. Wall Street firms such as BlackRock (BLK.N) and Fidelity could be poised to get long-awaited approval for a U.S. spot bitcoin ETF, and the asset’s price has gone up more than 80% this year. That indicates some investors still believe in crypto even if they’ve lost faith in its former stars. Much like social media, the Winklevii seem to be on the losing end of the crypto streak, too.
On July 7, cryptocurrency exchange Gemini sued Digital Currency Group, the parent company of now-bankrupt crypto lender Genesis, seeking over $1.1 billion. Gemini, Genesis’s largest creditor, alleged in the suit that DCG CEO Barry Silbert created false financial reports and misrepresented the accounting treatment of liabilities it assumed from Genesis. Gemini co-founder Cameron Winklevoss claimed in a July 7 Twitter post that DCG and Silbert were partially responsible for losses affecting thousands of Gemini users.
A DCG spokesperson denied the allegations to Breakingviews, calling them “baseless, defamatory, and completely false” in a statement on July 7, adding that it expects to bring Genesis’s Chapter 11 bankruptcy case to a conclusion soon.