Winklevii vs Silbert

Individual crypto businesses and their (cough) related parties often have more than a whiff of the ouroboros about them. But the industry as whole mostly resembles the spidermen circle of blame meme these days.

The latest example came earlier today, when Cameron Winklevoss of Gemini published an “open letter” to fellow crypto baron Barry Silbert of Digital Currency Group about $900mn that Gemini users are owed by DCG’s Genesis unit, which suspended withdrawals last year.

Aside from performative hand-wringing about Gemini customers like the “single mom who lent her son’s education money to you” and a “father who lent his son’s bar mitzvah money to you”, the most incendiary bit was this (FTAV’s emphasis below):

The idea in your head that you can quietly hide in your ivory tower and that this will all just magically go away, or that this is someone else’s problem, is pure fantasy. To be clear, this mess is entirely of your own making. Digital Currency Group (DCG) — of which you are the founder and CEO — owes Genesis (its wholly owned subsidiary) ca $1.675 billion. This is money that Genesis owes to Earn users and other creditors. You took this money — the money of schoolteachers — to fuel greedy share buybacks, illiquid venture investments, and kamikaze Grayscale NAV trades that ballooned the fee-generating AUM of your Trust; all at the expense of creditors and all for your own personal gain. It is now time for you to take responsibility for this and do the right thing.

Sound familiar?

Silbert understandably couldn’t let the thinly-veiled FTX innuendo pass, and responded on Twitter inside the hour.

DCG did not borrow $1.675 billion from Genesis

DCG has never missed an interest payment to Genesis and is current on all loans outstanding; next loan maturity is May 2023

DCG delivered to Genesis and your advisors a proposal on December 29th and has not received any response

— Barry Silbert (@BarrySilbert) January 2, 2023

Silbert has already revealed that DCG has borrowed $575mn from Genesis “in the ordinary course of business” and “always structured on an arm’s length basis and priced at prevailing market interest rates”.

The disagreement seems to come down to how one views the $1.1bn promissory note due in 2032 that DCG issued to Genesis when the parent had to step in to assume liabilities related to the implosion of Three Arrows, a crypto “hedge fund” Three Arrows. On this topic it’s worth reading Kadhim Shubber, Nikou Asgari and Josh Oliver on the “delicate links” between the various parts of the struggling DCG empire.

In related news, DCG’s flagship crypto product — the Grayscale Bitcoin Trust — now trades at a 45 per cent discount to its net asset value. That means that its market value

As long as you’re not one of the crypto bros directly affected by the shenanigans, it’s all very grimly amusing.