(Bloomberg) -- Crypto exchange Gemini Trust Co. withdrew hundreds of millions of dollars from Genesis Global Holdco LLC several months before the lender froze deposits and ultimately filed for bankruptcy.
Genesis and Gemini offered customers in the so-called Earn program the opportunity to generate yields on their crypto tokens. The service let customers of the Tyler and Cameron Winklevoss-owned exchange lend their tokens through Genesis.
In August 2022, Gemini took out about $282 million worth of cryptocurrency from Genesis. The news of the withdrawal was first reported by the New York Post.
In a lengthy statement posted on X, the platform formerly known as Twitter, Gemini said the funds represented “Earn users’ money” and belonged to neither the crypto exchange nor to its billionaire co-founders.
“As a result of our risk management, Earn users had $282 million less exposure to Genesis when Genesis halted redemptions on November 16, 2022,” Gemini said in the statement.
None of the money went directly to the Winklevoss twins, according to a person familiar with the situation who asked not to be named because they were not authorized to speak publicly.
Genesis did not return a request for comment. Gemini declined to comment beyond the post on X.
In the weeks after the collapse of FTX, the already beleaguered crypto market went into a contagion spiral. After Genesis filed for Chapter 11 bankruptcy protection in New York, Gemini entered a claim seeking $1.1 billion on behalf of Earn users.
Gemini, Genesis and its parent company Digital Currency Group have been locked in months-long settlement negotiations that have included public sparring between DCG’s founder Barry Silbert and the Winklevoss twins.
A tentative agreement reached in February was never finalized. Subsequent, mediated negotiations failed to result in a settlement agreeable to all involved. Then Gemini sued DCG for fraud in July.
In that lawsuit, Gemini said it had sought to terminate Earn in mid-October of 2022, and that one of its founders had a face-to-face meeting with Silbert who sought to assuage any concerns about insolvency. A DCG spokesperson called the lawsuit “a publicity stunt” and rejected any implication of wrongdoing.
Read: DCG, CEO Silbert Seek Dismissal of Gemini Suit They Dub a Smear
Adding to the complexity, Genesis in September sued its parent DCG over $620 million in unpaid loans. DCG declined to comment on Gemini’s withdrawals.
In January, both Genesis and Gemini were hit with charges by the US Securities and Exchange Commission, which alleged that the Earn program represented an unregistered offer and sale of securities. In a post on X published at the time, Tyler Winklevoss called the charges a “manufactured parking ticket.”
And federal prosecutors in Brooklyn are scrutinizing transfers between DCG and Genesis, Bloomberg reported in January.
Read: Crypto Blame Game Throws Shade Everywhere: Bloomberg Crypto (Newsletter)
--With assistance from Vildana Hajric and Michael Patterson.
(Updates with details from Gemini statement posted on X, the platform formerly known as Twitter)
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