Good morning and welcome from lovely Park City, Utah, which is the new home of Fortune Brainstorm Tech. I will be speaking with the CEO of Yuga Labs and other influential crypto and finance folks as part of a broader discussion of the big ideas that are shaping the future of business. It’s always a lot of fun—if you’re here, too, come say hi.
Meanwhile, one of the nastier fights in crypto has flared up again as the Winklevoss twins made good on a promise to sue Digital Currency Group (DCG) over alleged shenanigans related to the insolvency of the crypto conglomerate’s Genesis subsidiary.
It’s a complicated affair, but the short version is that the Winklevii’s company, Gemini, relied on Genesis to operate its Earn program, which paid retail investors up to 9% to park their crypto. Things went south when Genesis got wiped out after hedge fund Three Arrows Capital collapsed, and then, poof, the funds belonging to over 300,000 Earn customers got stranded on Genesis. Those customers are suing Gemini, and the Securities and Exchange Commission is suing both Genesis and Gemini—and now Gemini is suing Genesis’s parent company. Good times.
When this spat first became public in January, DCG accused the Winklevii of engaging in juvenile publicity stunts on Twitter—an accusation the company repeated in response to the new lawsuit. DCG is not wrong. The Winklevii’s strutting and name-calling on social media appears designed to spark media coverage and embarrass DCG and CEO Barry Silbert. But that doesn’t mean they don’t have a case.
The lawsuit includes new details about what went down as Genesis was slipping into insolvency last fall. According to Gemini, the company agreed not to sever its ties with Genesis after DCG said it would provide collateral to protect Earn customers—but then never transferred that collateral, leaving those customers high and dry. If this allegation is true, it suggests DCG had indeed operated in bad faith.
We won’t know the full truth until a court weighs in. It’s possible the Winklevii are using the lawsuit as leverage to extract a better settlement from DCG. There is also another way this could end: The Winklevii and Silbert, who are all billionaires, could dip into their own pockets to make the Earn customers whole and then work things out between themselves. But that would require an unusual degree of honor. And there’s not a lot of that in the crypto industry these days.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
