The ongoing legal battle between Digital Currency Group (DCG) and Gemini Trust took a new turn on Thursday as DCG, along with its founder Barry Silbert, urged a U.S. judge to dismiss the lawsuit brought forth by Gemini Trust, the cryptocurrency exchange established by billionaire twins Tyler and Cameron Winklevoss. The lawsuit alleges that DCG engaged in fraudulent activities related to Gemini Earn, concealing a substantial deficit of $1.1 billion on the balance sheet of its defunct Genesis Global Capital unit.
DCG and Silbert’s legal representatives contended that Gemini, being a “sophisticated market participant,” had full awareness that it was not obligated to rectify any misrepresentations made by Genesis. DCG asserted that the lawsuit was an integral part of the public relations strategy by Gemini Trust, aimed at shifting accountability. DCG further accused Gemini of having explicit knowledge of the risks involved, asserting that customers who deposited funds were well-informed of the uncertainties, given their expectations of elevated interest returns.
In a formal submission to the federal court in Manhattan, DCG and Silbert vehemently rejected the notion that parental accountability extended to every public statement issued by a subsidiary, dismissing it as “contrary to legal precedent.” The legal battle, which has gained momentum in the public eye, highlights the complex and evolving nature of cryptocurrency regulations and responsibilities.
Gemini, which is pursuing both punitive and compensatory damages through its lawsuit, saw its legal claim transferred from a state court in Manhattan. The company claims to be the principal creditor of Genesis, which has since gone bankrupt. Simultaneously, the U.S. Securities and Exchange Commission (SEC) has initiated civil charges against the Winklevoss twins, alleging a breach of investor protection regulations. The SEC’s accusations also extend to Genesis, asserting that the company held approximately $900 million from around 340,000 Gemini Earn customers, who were abruptly unable to withdraw their funds in the aftermath of the collapse of the FTX cryptocurrency exchange, led by Sam Bankman-Fried, in June 2022.
Forbes magazine estimates the net worth of each Winklevoss twin at $1.5 billion, underlining their significance within the cryptocurrency sphere and the financial industry as a whole. The legal case, identified as Gemini Trust Co v Digital Currency Group LLC et al, is being deliberated in the U.S. District Court, Southern District of New York, under the docket number 23-06864.
Requests for commentary made to legal representatives of Gemini remained unanswered at the time of reporting. The complex and high-stakes legal clash between these cryptocurrency giants serves as a critical juncture in the broader discourse around legal responsibilities, financial transparency, and the maturing regulatory landscape of the digital asset sector. The outcome of this case is anticipated to set precedents that could significantly influence the future conduct of cryptocurrency exchanges and related businesses.
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Source: Reuters
