Cryptocurrency exchange Gemini and bankrupt crypto brokerage firm Genesis may merge in October 2022 after hedge fund Three Arrows Capital collapses, leaving Genesis with $1 billion in losses We discussed.
The discussion took place with Barry Silbert, CEO of Digital Currency Group, which owns Genesis, according to emails included in Silbert's motion to dismiss the NYAG lawsuit against him for allegedly concealing losses. The announcement was made at a luncheon with Gemini co-founder Cameron Winklevoss.
According to Silbert's memo sent to other DCG and Genesis executives, he revealed that Genesis could be headed for bankruptcy, which could have a major impact on Gemini. This was because Gemini had lent user funds to Genesis as part of the exchange's acquisition program, which it was unsure whether Genesis would be able to repay.
Silbert noted that options could range from a commercial partnership to a complete merger of the companies. At the time, he said the latter option was the most exciting because the combined company would be “a huge company and could compete with Coinbase and FTX.” He said the combined company could raise $500 million to $1 billion and go public within two years.
Providing Circle with “Management for Profit”
Silbert's memo said Gemini is part of DCG's family of crypto companies and will be able to benefit from other portfolio companies. This includes Genesis flowing orders directly to exchanges, Foundry directing trading and storage to Bitcoin miners, and tapping crypto news publication CoinDesk to attract new customers. It is possible that the He added that Circle and USDC could benefit from deploying Gemini's stablecoin GUSD to its portfolio companies.
“There are so many things that Gemini and Genesis can do together even without a merger,” Silbert said. “The two companies should work together, not apart.” “Frankly, terminating the partnership with Arn poses a potentially catastrophic risk to Genesis and, by extension, Gemini. So at the very least they should reconsider that decision.”
Silbert noted that he had some concerns at the time. He was concerned that Genesis would not be able to replace the needed liquidity at the pace being discussed. He also worried that if Genesis failed to replace liquidity, it could trigger a run on Genesis by other lenders. “We need to avoid mounting attachments at all costs,” he said.
no merger took place
After this luncheon took place, Gemini and Genesis did not merge and continued to argue over the repayment of funds lent during the Earn program. Genesis filed for bankruptcy in January 2023. A few months later, Gemini sued DCG for alleged fraud related to the Earn program.
In October 2023, NYAG filed a complaint against Gemini, Genesis, DCG, Silbert, and former Genesis CEO Michael Moro, alleging that the companies covered up a $1 billion hole. DCG sold CoinDesk to Block.one's cryptocurrency exchange Bullish in November 2023. On March 6, 2024, DCG and Barry Silbert filed a motion to dismiss the NYAG lawsuit.
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