From ‘Bitcoin Billionaires’ to SEC Fees: A Brief History of Crypto for the Winklevoss Twins

Cameron and Tyler Winklevoss went from being co-creators for Facebook who were duped by Mark Zuckerberg (as portrayed in the movie “The Social Network”) to early adopters of crypto who became “bitcoin billionaires. Now their company has been charged by the US Securities and Exchange Commission (SEC).

The Securities and Exchange Commission (SEC) struck twin cryptocurrency exchange Gemini with securities infringement charges Thursday over the Gemini Earn program, which promised to return customers who deposited their cryptocurrency holdings. Genesis, its lending partner in the program and a subsidiary of the Digital Currency Group (DCG), is also charged, along with Gemini.

The charges come several weeks later Increasingly public disagreements Between Gemini and DCG leadership post-November FTX cryptocurrency exchange collapseResulting in A new wave of industry infection Where the funds stored on FTX were either locked or lost. Genesis is said to be on the hook for more than $900 million in Gemini clients’ money.

How did it come to this? Here’s a look at the Winklevoss twins’ rapid rise in the cryptocurrency industry and the recent moves that led to a public spat between Gemini and DCG, SEC charges, and an apparently huge hole in Gemini’s finances.

Founding Gemini

The Winklevoss twins received about $65 million in cash and Facebook stock in a 2008 settlement over the creation of the social media giant. After establishing the family office Winklevoss Capital in 2012, the brothers began accumulating large amounts of bitcoin. The twins had the same destiny 1% of the circulating supply of the leading cryptocurrencies as of November 2013, according to Washington Post.

They’ve gone from buying a stash of Bitcoin to leading an investment round in BitInstant, an early Bitcoin exchange whose founder Charlie Shrem was later jailed for money laundering related to the Silk Road market. Also that year, the twins attempted to launch their first-ever Bitcoin ETF (or exchange-traded fund), which was rejected by the Securities and Exchange Commission (SEC).

In 2015, the Winklevoss brothers opened Gemini, a cryptocurrency exchange licensed in their home state of New York. The platform has expanded over the years NFT Nifty Gateway market in 2019, before an eventual NFT market boom in 2021. Parent company was Gemini Space Station worth $7.1 billion As of November 2021.

It was Cameron and Tyler They are considered “Bitcoin Billionaires” For the first time in 2017 (as dated on Bin Muzrish book with the same name) as the price of bitcoin soared to nearly $20,000, and Forbes Currently each brother is estimated to Her net worth is $1.1 billion.

But with the cryptocurrency industry in turmoil over the past several months, Gemini and its founders have faced new challenges. In June 2022, the CFTC in the United States Gemini charged “For making false or misleading material statements” as it seeks approval for its future Bitcoin product, Gemini Lay off 10% of its employees With the downturn in the cryptocurrency market.

Gemini vs. Genesis

A fresh wave of turmoil in the cryptocurrency industry fueled Gemini’s recent woes, which began in early November FTX cryptocurrency exchange collapse and sister business Alameda Research.

Soon after, Genesis announced that it would be doing so Suspension of customer withdrawals It discontinued its lending arm due to the “FTX effect”, citing “unprecedented market turmoil” in the inability to continue business as usual. Genesis was Gemini’s partner for Earn’s interest-bearing product, and Gemini said it would have to freeze customers’ funds as a result.

in December , financial times I mentioned that Genesis About 900 million dollars From customer funds from the Gemini Earn program. The digital currency conglomerate – which owns Genesis, Grayscale Investments and other crypto companies – is alleged Dealing with liquidity problemsaccording to Cameron Winklevoss, although founder and CEO Barry Silbert has Assure investors otherwise.

At the beginning of 2023, the private negotiations between Gemini and Genesis broke out into the open when Winklevoss wrote an open letter to Silbert. In the letter, it is Silbert was accused of “bad faith stalling” towards finding a solution to the dispute over the funds, which indicates evasive tactics on the part of the DCG boss. Silbert denied the charges.

The allegations intensified on Jan. 10 of Cameron Winklevoss He called for Silbert’s resignation, which indicates accounting misrepresentation and fraud at DCG. the The company responded Calling Winklevoss’s claims “another desperate and unconstructive publicity stunt” on the part of Gemini’s founders, which it said was “solely responsible for operating Gemini Earn and marketing the software to its clients”.

Then Gemini announced that it had officially done so She finished her Earn Program, which said it would force Genesis to pay back what it said was more than $900 million in customer funds it held. The program has been running for nearly two years in partnership between Gemini and Genesis.

SEC fees

This situation remains unresolved as of this writing, but now both Gemini and Genesis face a new hurdle in the form of SEC fees related to Gemini earnings. The agency alleges that the companies sold unregistered securities to clients, raking in billions of dollars in cryptocurrency in the process from hundreds of thousands of users.

“We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors,” said SEC Chairman Gary Gensler. “Today’s fee builds on past actions to make it clear to the market and the investing public that cryptocurrency lending platforms and other brokers need to comply with time-tested securities laws.”

in Reply TweetTyler Winklevoss questioned the timing of the charges, saying Gemini had been in discussions with the Securities and Exchange Commission for 17 months and that the program was regulated by the New York Department of Financial Services.

Despite these ongoing conversations, the SEC chose to announce their lawsuit to the press prior to notifying us. “Super lame,” he tweeted. “It is unfortunate that they are optimizing for political points rather than helping us pay the case of 340,000 earners and other creditors.”

He added that “Gemini has always worked diligently to comply with all relevant laws and regulations.” Genesis and DCG have not yet commented on the SEC’s accusations.