Billionaires Tyler and Cameron Winklevoss dipped into their own pockets to support their crypto exchange Gemini Trust, which has faced numerous setbacks during the year-long market downturn for digital assets.
According to two people familiar with the matter, the once-Facebook investors made a $100 million loan to Gemini recently. The move came after Gemini had informally sought funding from outside investors in recent months without coming to any agreements. Gemini and the Winklevoss brothers did not respond to requests for comment.
Gemini to Launch International Derivatives Exchange
This type of derivative is banned in the U.S. for retail customers as it doesn’t have an expiration date and can be traded with significant leverage, which results in a high-risk investment instrument.
In fact, the users of Gemini Earn— a yield-generating product of the exchange—have been severely affected by the gruesome aftermath of the FTX collapse. The FTX implosion led to a chain reaction that affected a number of prominent crypto businesses in the industry, one of them being Genesis Global.
Genesis Global had been Gemini’s only partner for its Earn lending program. However, the long-standing partnership turned bitter when Genesis froze customer withdrawals in November in wake of the FTX crisis.
This, in turn, compelled Gemini to halt redemptions on all of their Earn accounts, leaving customers distraught.
In light of this decision, about $900 million in customer funds were left unaccounted for, which provoked a heated argument between the Winklevoss twins and Barry Silbert.
The two sides finally settled their issue in February after months of negotiations.
Additionally, the U.S. SEC filed a lawsuit against Gemini and Genesis on the grounds that the Earn program violated regulations pertaining to the sale of securities.
Furthermore, Gemini is being sued by the Commodities Futures Trading Commission (CFTC), which asserts that the exchange lied to the derivatives regulator in an effort to create the first Bitcoin futures contract that is regulated by the United States government.
Who are the Winklevoss Twins, Really?
The Winklevoss twins first hit the headlines in 2004 when they sued former Harvard classmate Mark Zuckerberg, claiming he stole their idea for Facebook.
Venture funding for crypto start-ups then cratered following the collapse of crypto exchange FTX and slowdowns in the technology and crypto industries, plummeting 80 percent to $2.4 billion in the first quarter compared with the same period last year.
Gemini experienced its own troubles during the crypto bear market, a sharp contrast to when it raised $400 million at a valuation of US$7.1 billion in November 2021.
It All Leads Back to the FTX Demise
The fallout from the implosion of FTX led to the bankruptcy of crypto lender Genesis Global Holdco, severely bruising Gemini in the process. (this is where it all went wrong).
Genesis Global had been Gemini’s sole partner on its Gemini Earn lending product, and when Genesis froze withdrawals in November, that forced Gemini to pause redemptions on the Earn accounts.
The move left customer money in limbo and sparked a heated spat between the Winklevoss twins and Mr. Barry Silbert, chief executive officer of Digital Currency Group, the parent company of Genesis. And that’s why we are where we are with Genesis today.