Bloomberg reported that the twin billionaires Tyler and Cameron Winklevoss provided personal financial support of $100 million to their cryptocurrency exchange, Gemini Trust Co, to help it survive the market decline.
According to sources, Gemini had attempted to secure funding from external investors in the preceding months without success.
Data from research firm PitchBook revealed venture funding for cryptocurrency startups had experienced a significant decline of 80 percent. The funding dropped to $2.4 billion in the first quarter of this year compared to the same period last year.
During the crypto bear market, Gemini has faced its own difficulties. This ordeal is in stark contrast to November 2021, when the company raised $400 million and attained a valuation of $7.1 billion.
EXCLUSIVE: Gemini founders Tyler and Cameron Winklevoss have lent $100 million to the crypto platform https://t.co/owaGrepngE
— Bloomberg (@business) April 10, 2023
The collapse of FTX also forced crypto lender Genesis Global Holdco to file for bankruptcy, severely impacting Gemini. Genesis was the only partner of Gemini on its Gemini Earn lending product.
When Genesis froze withdrawals in November, Gemini paused redemptions on Earn accounts. This move led to $900 million of customer funds being locked up, creating tension between the Winklevoss twins and the CEO of Digital Currency Group Barry Silbert — the parent company of Genesis.
In February, the parties agreed to resolve the dispute, in which Gemini would provide up to $100 million. However, the loan from the Winklevoss twins is separate from this agreement and is intended to fund operations, according to a person familiar with the matter.
Gemini faces lawsuits
Earlier this year, the U.S. Securities and Exchange Commission accused Gemini and Genesis of offering unregistered securities through their Earn program.
SEC officials stressed that Genesis had an obligation to register its Earn program as a securities offering. Chair Gary Gensler further explained that these charges are designed to reinforce previous regulatory actions.
These charges also aim to inform “crypto lending platforms and other intermediaries” that they must comply with the well-established securities laws. After all, Gemini’s Earn program significantly affected 340,000 investors.
The regulatory agency claimed that from January to March 2022, Gemini made $2.7 million in agent fees while using client funds for various lending activities and as collateral for personal borrowing.
— TradingView (@tradingview) December 31, 2019
Tyler criticized the agency and accused them of issuing a baseless charge. He said the Gemini team had been in discussions with the regulator for over a year before the enforcement action was taken.
This statement is similar to that of Coinbase, whose chief legal officer said they had met with SEC representatives “more than 30 times over nine months” but still received a notice.
Besides the ongoing SEC investigation, the founders and two directors of Gemini and BlockFi have also been sued by investor Trey Greene in the U.S. District Court for the District of New Jersey on February 28.
The allegations include violating consumer fraud and exchange acts, breaching their fiduciary duties and offering and selling unregistered securities.
Greene said he invested more than $1.5 million in interest accounts that he claims are unregistered securities, earning over $400,000 in capital gains. However, he could not withdraw his funds as BlockFi froze all withdrawals on November 10, the same day FTX filed for bankruptcy.
According to the claims, Gemini was responsible for safeguarding the cryptocurrency holdings of BlockFi’s clients through its custodial services. However, the company is accused of misrepresenting the accessibility of these funds to customers.
Greene demanded compensation for every alleged offense. These included three times the damages for breaking the consumer fraud act, payment of legal fees, a complete return of all the funds and the accrued interest received by the defendants and a verdict prohibiting similar breaches of the consumer fraud act.