February 29, 2024 • 47 mins
Though the Winklevoss brothers are best known for their role in the early days of Facebook, you'll be surprised to learn that they recently lost customers at their cryptocurrency exchange over a billion dollars through a shady loan scheme. In this episode, Ed Zitron walks you through how the two identical riverboat giants went from being conned by Mark Zuckerberg to conning over a hundred thousand people into putting their cryptocurrency in the hands of the world's worst investor.
Better Offline Theme Song Spotify Pre-Save Link - https://distrokid.com/hyperfollow/mattosowski/better-offline-theme-song-2?utm_campaign=website&utm_medium=Email+&utm_source=SendGrid
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
All Zone Media.
Speaker 2 (00:05):
Hello and welcome to Better Offline. I'm your host ed Zetron.
This is a weekly tech show where I walk you
through the good, the bad, and the stupid of a
multi trillion dollar industry that's changed and monetized almost every
part of our lives. So you're likely aware of the
(00:32):
tale of Sam Bankman Free, the curly haired fraudster who
conned millions of people out of billions of dollars, crushing
the cryptocurrency markets in the process. He did so by
creating a cryptocurrency exchange called ftx, where people could buy
things like bitcoin and ethereum, except it had one little catch.
He was stealing the customer funds, keeping only a little
(00:52):
around at any given time for people to withdraw. This
meant that when hundreds of thousands of people went to
withdraw their funds at once, the entire scheme fell apart
and FTX collapsed. Bankman Fried currently sits in prison awaiting
sentencing after being convicted and several counts of fraud, including
wirefraud and wirefraud conspiracy, which is appropriate as him and
his co conspirators at one point genuinely used their group
(01:16):
called wirefraud Chat and I am not kidding yet. This
isn't about SBF. There are actually two other villains in
this story, two villains of the recent crypto crash that
you might have missed, despite the fact that they're both
six foot five and lost their customers over a billion dollars.
I'm talking about Cameron and Tyler Winklevoss, two brothers, both
(01:40):
alike in dignity and appearance, the gay notoriety by suing
Mark Zuckerberg of Facebook now known as Metta in the
early days of the social network back in two thousand
and four. In the Winklevi's defense, Zuckerberg dig screw them
as a student at Harvard, where he pretended to work
on the Winklevoss's social network, Harvard Connect while actually working
(02:00):
on the earliest version of Facebook, effectively sabotaging the competition
from within. When Facebook finally launched the identical Moist, Riverboat
Giants alleged that Zuckerberg had stolen their idea for a
social network and used their code, resulting in a year's
long back and forth and a sixty five million dollar
settlement that the Winklevosses were forced by a court to accept.
(02:21):
In twenty eleven, I think the had Zuckerberg kept his
filthy little hands to himself, we'd likely never have heard
of Tyler and Cameron Winkelvoss, and I believe the world
would have been a better place if they weren't already.
The Winklevoss twins were now millionaires. In twenty ten, Aaron
Sorkin's Oscar nominated retelling of the Facebook origin story the
(02:42):
social network would raise their profiles even further, portraying them
as victims of a calculated, misanthropic opportunist, Mark Zuckerberg. Of course,
you could almost feel sorry for them, even if they
were portrayed by Armie Hammer, the famous cannibalism fan and
potentially perverted in enjoyer of other things too. But you
(03:03):
really shouldn't feel sorry for Army Hammer. But you definitely
shouldn't for the Winklevosses either. In the years following their
legal dust up with Mark Zuckerberg, the Winklevoss twins remained
active in the tech scene, launching an investment fund in
twenty twelve that focused on early stage, consumer centric startups.
A year later, they acquired eleven million dollars of bitcoin,
and while it's unclear exactly how much they bought. A
(03:25):
New York Times article about their acquisition, which of course
featured no verification of that actual purchase, ran on April eleventh,
twenty thirteen, when bitcoin was around one hundred and fourteen
dollars apiece, meaning that the Winklevoss brothers likely bought somewhere
in the region of ninety thousand bitcoin. Based on today's valuation,
those holdings would be worth an excess of three point
(03:46):
eight billion dollars. It was a big, stupid bet, and
it absolutely paid off. In the same year, they'd pursue
creating a bitcoin exchange traded fund also known as an ETF,
a thing that allows you to invest in something, in
this case bitcoin, much like you would trading a stock,
without all of the complexity and risk associated with actually
(04:07):
owning the thing in question, in this case bitcoin. While
this never materialized, the winklevoss Is cozied up with New
York's Department of Financial Services and realized they could found
their own cryptocurrency exchange to rival the other American rival, Coinbased,
which had launched two years earlier. A cryptocurrency exchange, as
I've discussed, is a place where you can buy and
(04:28):
sell your crypto using generally a credit card or a
debit card. At the time very focused on debit cards,
though in twenty fifteen they launched Gemini, what would eventually
become a major and highly respected cryptocurrency exchange that from
the very beginning tried to swaddle its ugly and often
fraudulent industry in a blanket of legitimacy, winning approval from
(04:48):
New York state regulators to provide certain financial services. Gemini
now sits as one of the top ten largest cryptocurrency
exchanges in the world and one of the few remaining
American exchange. One might be forgiven for thinking they were trustworthy,
and they'd be wrong. Toward the end of twenty twenty,
the price of cryptocurrencies began to climb rapidly, with bitcoin
(05:11):
climbing from nineteen thousand dollars in December to over forty
thousand dollars in January, cresting over fifty thousand dollars a
bitcoin by March twenty twenty one. The cryptocurrency industry would
see more venture investment in the first quarter of twenty
twenty one than it had in the entirety of twenty twenty,
with one hundred and twenty nine crypto and blockchain startups
receiving two point six billion dollars in the space of
(05:33):
three months, compared to three hundred and forty one cryptocurrencies
receiving two point three billion in the entirety of twenty twenty.
As an explanation for those listeners that don't know, venture
capital investments are generally investing inequacy in the companies. They
buy a piece of the company for a certain amount
of money, venture capitalists, of course, taking the risk that
(05:54):
the company will fall apart. What differs with a lot
of these companies is that they will sometimes sell you
a token. This isn't necessarily relevant for this story. I
just want you to know the fact that this industry
at its core is based on the idea of basically
selling securities, you know, like stocks, but hiding from the
law and conning people. That's not how the Winklevosses fucked
(06:18):
people over, though, no. So another thing to realize about
these crypto companies is that they didn't really do anything.
They'd sell tokens. They would claim that they would build
something in the future on something called a roadmap. They
would sometimes have a white paper which would describe some
underlying technological stuff. But there are really none of them
that had a feature or a function. They were mostly
(06:41):
just nonentities that promise things. But because you could trade
their tokens, which much like a stock, should have been
regulated by the government, but were not because they were
such new financial devices and objects. Well, this whole market
was growing and growing and growing, and along with it,
(07:02):
the Winklevosses were getting even richer. Then they got greedy.
To understand how the Winklevosses bungled a billion dollars, I
have to give you a little bit of background on
the last few years of hell in the cryptocurrency industry.
In February twenty twenty one, Gemini, that's their cryptocurrency exchange
where you could buy and sell different cryptocurrency began something
(07:23):
called Earn, their Earn program. It was an interest earning
program where users could feed their cryptocurrency like Bitcoin, for example,
into Gemini through a few clicks and earn interest. And
you should put quotation marks around those so you would
get a percentage return on the crypto that you put
into Gemini Earn. One might be forgiven for believing that
(07:46):
as a result, they were putting money into some sort
of secure protected account like a certificate of deposit. They
really were not, I must be clear, how not like
a bank. This was Gemini, a New York based trust
company that promised to security protocols on par with those
offered by top financial institutions. Claimed to generate this interest
by working with and I quote institutional borrowers who were
(08:10):
partners who had been vetted through Gemini's and I quote
again risk management framework. What's also important to know is
that none of what you're about to hear was the
security issue. It was entirely the result of two greedy
riverboat giants pissing away money because they were greedy little pigs.
And as a result of trusting this company that was
(08:31):
a trust company, a New York based trust company, a
regulated one allegedly, but not regulated for the thing that
I'm about to tell you, people trusted them, and as
a result, customers deposited somewhere between seven hundred million and
a billion dollars of funds into Gemini Earn, believing that
Gemini was offering something akin to an interest generating savings account.
(08:52):
After all, Gemini had institutional partners, and that is plural.
That's what they said and they had vetted said partners
through their collateralization management process, which means, in the case
of a loan, you collateralize the loan, you give them something.
For example, you would collateralize the loan for a house
by giving them a down payment of twenty percent. In
the case of a loan, you might borrow a certain
(09:14):
amount of money, but put some money down so they
have something in the event that you default on the loan.
In plain English, they were claiming to work with institutional
investors like banks and hedge funds that would pull Gemini
earn customers, so people giving them their Bitcoin ethereum and
all that they would pull those resources to allow them
to get involved in big trades with better returns than
(09:36):
users will be able to get on their own. Indeed,
classical financial markets have larger loans that have preferential rates
and get involved in deals that the regular customer would
not be able to. That's what people thought they were getting.
The other suggestion was that Gemini had diversified its risk
and there's actually an archived version of the Gemini earned
Patron twenty twenty one that said that Gemini worked with
(09:58):
multiple accredited party borrowers to do so. As a result,
as a customer, you may believe, well, if one fails,
that won't be the end of the world. Right. It's
also important explaining that the way that a lot of
these companies in crypto made their money was by loaning
it to others in the form of margin trading, where investors,
(10:20):
both retail and institutional, borrowed a massive amount of cryptocurrency
in returned for collateral which was usually less than the
amount they were borrowing. As I mentioned, kind of like
putting a damn payment for a house, except the asset
is a token on a blockchain like bitcoin. In fact,
as you'll find out, most of the cryptocurrency industry was
(10:41):
held up by these loans. Now, all of this supposedly
legal and cool and normal stuff. All this sounded very trustworthy.
This was, of course not the case. Neither was it
the case that Gemini had diversified their investments at all,
or actually really any risk management of any kind. Although
(11:02):
Gemini had the outward appearance of being a highly diversified,
sophisticated and well run financial services business, it actually wasn't.
They placed the vast majority of their eggs in one
single basket, and that was a cryptocurrency brokerage called Genesis.
Genesis provided a variety of cryptocurrency related services for large
(11:25):
institutional investors and high net worth individuals. Their money was
made by offering these institutions and individuals loans leveraged by
their cryptocurrency, which Genesis would in turn invest, theoretically profiting
in the process through their access to large deals. As
I previously mentioned, when I say leverage, I mean the
(11:45):
very simple thing of I give you some money and
then you lend me money in return, and there is
usually some sort of interest deal, or there is some
way where both parties benefit. Sometimes it will be that
they are borrowing an asset like bitcoin. The price can change,
then the collateral they give maybe an excess of the
amount they're borrowing in dollars, but the price of bitcoin
(12:07):
may go down. Thus, as a result, if I loaned
somebody a billion dollars a bitcoin, but the price of
bitcoin went down and they gave me, I don't know,
one point something billion in return, They're gambling the idea
that bitcoin will go up from there, and I'm gambling
that it will go down, and I would have made
money on that loan. This is a messy stupid assholes
industry one built on sand and you're about to find
(12:29):
out how badly it can go. So Genesis was also
part of a huge empire called the Digital Currency Group,
a holding company for multiple different parts of the cryptocurrency ecosystem,
including cryptocurrency news outlet coin Desk, which ironically was a
large part of the reason that Sam Bankman Freed has
gone to prison. I could do an entire episode on
(12:52):
this company, but all you really need to know is
that they own Genesis, and while Genesis was meant to
be independent, it absolutely was not. And what's really important
to know is how stupidly Genesis was run. They weren't
simply bad at investing. They were so bad at investing
that they somehow managed to invest in not one, but
two of the entities that brought down the entire cryptocurrency
(13:15):
industry in twenty twenty two. Their first mistake was investing
two point four billion dollars in Three Arrows Capital, a
major cryptocurrency hedge fund that ended up being a significant
scam that also led to the collapse of FTX, the
other entity that Genesis had trusted with its capital, and
again that's the subject of another episode. Three Arrows Capital
(13:37):
was a Singapore based cryptocurrency hedge fund with over a
decade worth of history. Run by two guys. It started
life in arbitrage, essentially making money on the differences in
prices of products in two separate locations, with a niche
in smaller traditional currencies like the ty bart and the
Indonesian Rupia. This business model often relied on a healthy
relationship with legacy banks. We had some success on that front.
(14:01):
It's relationship soured in twenty seventeen, forcing the company to
pivot to the wild West of cryptocurrency. It started investing
its client's money in early stage crypto projects, hoping for
a big return when their values went up. One of
these projects was terror Lunar, an algorithmic stable coin which,
in plain English is meant to be a cocoon on
the Ethereum blockchain that is always related to the price
(14:23):
of a dollar, except in this case. You may have
heard that word algorithmic. You know what The problem with
algorithms is they need to be perfect in they almost
never are. But this bit kind of requires some explanation,
so bear with me. Cryptocurrencies like Bitcoin and Ethereum, they're
wildly volatile, which is bad if you want to actually
(14:46):
transact with them. If a currency could be twenty five
percent more or less the next day, how do you
actually know what to charge for something? And that's where
stable coins come in. These are cryptocurrencies that aim to
fix their value to that of a traditional fiat currency
like the US dollar or the Euro. Most stable coins have,
(15:06):
or say they have, at least a cash reserve equivalent
to the amount of tokens in circulation. Terror Lunar differed
using an algorithm to maintain price parity rather than any reserves.
The algorithm worked until it suddenly and violently did not.
On May third, twenty twenty two, a Terror stable coin
(15:26):
was worth one dollar. A few days later, it was
worth a fraction of a penny. The Bearre offline theme
song by Mattasowski will be dropping this Friday, March first,
(15:46):
on all streaming platforms. You can find the Spotify presab
link in the episode notes. Terr Luna collapsed in May
(16:11):
twenty twenty two with the loss of forty five billion
dollars in market capitalization, meaning the total value of all
of the tokens on the blockchain. Three arrows capital's entire
five hundred million dollar position in Lunar was now effectively worthless.
This collapse also shaved off and estimated one trillion dollar
(16:33):
value from the wider crypto market. Three Arrows Capital, the
so called hedge fund to quote research firm fs insight,
was an old fashioned, made off style Ponzi scheme where
founders Suzo and Carl Davis would use client funds to
borrow from basically anywhere that would let them in the
entire crypto ecosystem. And because Three Arrows didn't bother collateralizing
(16:55):
these loans sufficiently or managing the risk behind them, there
was very little money to turn to customers. The failure
of Three Arrows Capital left a multi billion dollar hole
in Genesis balance sheet that if paypered over with a
one point one billion dollar promissory note from its holding company,
Digital Currency Group that was due in twenty thirty two.
(17:18):
This sounds like it would be helpful, right. The problem
is this maneuver never appeared to involve the conveyance of
any actual money. It pretty much existed only to pretend
that Genesis had another one point one billion dollars on
the books. To be abundantly clear, no money actually ever
got sent to anybody. This promissory note only existed to
(17:39):
mislead creditors about the financial health of Genesis. As you
can understand, those creditors would probably want to know, well, okay,
do you have enough money in case we need our
money back? Little bit of a spoiler for you, they didn't.
The Terror Lunar and Three Arrows capital fiasco trash the
value of cryptocurrencies, with Bitcoin dropping from around thirty thousand
(18:00):
in mad twenty twenty two to less than twenty grand
in October. And in November twenty twenty two, ftx collapsed
as a result of the coin Desk article, again owned
by DCG, that revealed that most of ftx's assets were
held in FTT, a token that they owned the majority
of and could never sell because doing so would crash
the FTT market, making said asset worthless. Indeed, in cryptocurrency,
(18:22):
this is a big problem. If you have a big
market and say there's twenty billion dollars of a token
out there, but one person owns a billion of it,
they actually can't sell it because in doing so, the
market would suddenly think, oh, this is worthless because someone
wants to dump him. The results of this revelation that
FTX was holding most of the world's FTT and thus
(18:44):
could never sell it, and indeed that in the process
made their company pretty much insolvent. This left both retail
investors and institutional investors out to dry. Now eager ide
and eager eared listeners may have probably guessed by this
point that Genesis was inexhoribly entangled in this disaster, quickly
(19:04):
going from saying that they had no material exposure to
FDx on November eight, twenty twenty two, to then saying
they had seven million dollars of exposure on November tenth,
to saying that they had one hundred and seventy five
million dollars in exposure a day later, to saying that
they needed to freeze all customer withdrawals and new loans
entirely and that they would likely be going bankrupt, which
(19:24):
they said on November eighteenth, twenty twenty two. They entered
Chapter eleven bankruptcy. In the early twenty twenty three. The
Digital Currency Group, which of course owns Genesis, had also
borrowed five hundred and seventy five million dollars from them,
which has since led to the hilarious situation of Genesis,
suing the company that owns it as part of its
own bankruptcy proceedings. This is the company that the Wingovoss
(19:47):
twins and Gemini their cryptocurrency exchange, had allegedly run through
their risk management framework and despite allegedly reviewing the collateralization
management process that Genesis underwent, which means how they lateralized
the loans, what money they took in to make sure
that the loans did not just fall apart if something
bad happened. Well, Gemini hadn't diversified their investments at all.
(20:10):
They put over a billion dollars of customer funds into Genesis,
money which is most likely gone now. In many respects,
Gemini was the cryptocurrency equivalent of Green Seal Capital, a
company that at one point was the highest profile lender
in the supply chain financing space, touting former British Prime
Minister David Cameron as one of its advisors. Like Gemini,
(20:31):
green Seal Capital pretended to be a diversified business, when
in reality it borrowed money from large institutional investors to
lend to a handful of companies. The circumstances behind its
collapse are slightly more complicated than those of Genesis, but
not by much. Green Sill's implosion in twenty twenty one
rippled throughout the industry, contributing to the demise of the
already troubled credit sueese which were acquired really they were
(20:53):
rescued by UBS in early twenty twenty three for the
bargain price of just three point twenty five million dollars.
Since November twenty twenty two, when Gemini froze, withdrawals from
Gemini earned the interest bearing account, the Winklevosses and Barry Silbert,
CEO of Digital Currency Group, who, as I've mentioned, are
technical owners of Genesis, have engaged in an embarrassing back
(21:15):
and forth publicly on Twitter, where the Winklevosses have attempted
to frame themselves as victims of a scam rather than
bad actors acting badly. If they were remotely competent, they
could have yanked their customers' funds the ones loaned to
Genesis from the Gemini ern program. When it was revealed
that Genesis loaned two point four billion dollars for three
(21:35):
hourrows capital in July of twenty twenty two, call it
what you want. Prudent's diligence or just risk management, but
it would have been the sensible thing to do, unless,
of course, they didn't believe they'd be able to get
the money out. On October nineteenth, twenty twenty three, New
York Attorney General Letitia James filed a massive fraud suit
(21:55):
against Gemini, Genesis Global Capital, and Digital Currency Group, ring
a conspiracy to mislead customers and cover up of rebillion
dollars of losses. The Attorney General's office found that the
twin brothers named Cameron and Tyler Winklevoss had misled investors
about the risks associated with Genesis, and that Genesis not
only failed to disclose its losses, but took steps to
(22:19):
actively hide them from their clients and the public. The
New York Attorney General's suit is damning and shows that
Gemini was well aware of the rotten condition of Genesis
from the launch of the program in twenty twenty one.
With Gemini and I quote the Attorney General suit here
their internal risk analysis showing that Genesis Capital's loan book
(22:41):
was undercollateralized, which means that they did not have enough
money to give back the money that they owed to
their customers and that only a year into the program,
Gemini revised its estimate of Genesis Capital's credit rating, which
is the way in which you measure whether a creditor
or someone who is borrowed or loaning money whether they're
(23:02):
worthy of doing so. They provised its testiment of their
credit rating from an investment grade of BBB to a
non investment or junk grade of CCC. Don't need to
get too technical here, just know that's pretty bad. Genesis
also routinely reported to Gemini from May twenty twenty two
through November twenty twenty two that he had failed its
own internal loan book risk assessments, to the point that
(23:24):
in July twenty twenty two, a Gemini board member compared
Genesis Capital to Layman Brothers prior to the financial collapse
of two thousand and seven and two thousand and eight.
At this point, you're probably thinking, so all the money's
gone and your raim. Gemini and the Winklevosses decided they
would terminate the EARN program on September second, twenty twenty two,
(23:46):
but only decided to inform Genesis that it would do
so on October thirteenth, twenty twenty two. It continued to
send customer funds to Genesis throughout this period until an
indeterminate time, with all of this information coming from the
Attorney General's suit, and they failed to let customers know
that the program was fully terminated until January twenty twenty three,
(24:08):
though I should add that they froze with drawals in
November twenty twenty two. All of these dates are very confusing,
but the important facts to know is that Gemini knew
from twenty twenty one that they were sending customer funds
into an unreliable, unstable, undercollateralized lender for years, and indeed,
(24:28):
even when they froze their own program when they decided
that the party had to stop in September twenty twenty two,
they were still taking customer funds and putting it in
Genesis's hands. They didn't freeze the withdrawal process, the way
in which customers have withdrawn their funds, until November twenty
twenty two, So that's months of throwing customer money into
(24:52):
the toilet and aggressively flushing it like you're trying to
get rid of a basketball. They knew. Cameron and Tyler
Winklevos knew. They knew what they were doing. They knew
they were losing customers money, and they didn't care. Two
American billionaires put a billion dollars of customer funds into
(25:17):
deeply questionable lenders' hands, then proceeded to obfuscate the risks involved.
They claimed that Genesis had appropriate risk ratios and healthy
financial condition as recently as November fourteenth, twenty twenty two,
a full month after it had formerly terminated their agreement
with Genesis, who was the company that they were lending
(25:38):
this too. This wasn't a casual fling with a risky
asset class. It was a near billion dollar swindle of
and I quote Cameron Winklevoss in his abominable letter to
Barry Silbert, a swindle of a single mother who lent
her son's education money to them, a father who lent
(25:59):
his sons by me for money to Gemini earn, a
husband and a wife who lent their life savings. A
school teacher who lent his children's college funds. Cameron and
Tyler Winklevoss, as well as Barry Silbert, who runs Digital
Currency Group and by proxy, Genesis, have defrauded investors at
(26:19):
a similar scale to Sam Bankman freed. As I mentioned
the disgraced and now incarcerated CEO of FTX, They convinced
customers that they were putting money into an interest generating account,
tricking them into believing that this was a stable, risk
managed investment, one that was continually liquid, and they indeed
advertised that you could withdraw your assets instantly, as opposed
(26:41):
to the reality that Cameron and Tyler Winklevoss knowingly funneled
customer funds into an unstable undercollateralized lender. They intentionally and
repeatedly misled customers, claiming to an Earn investor on June
twenty seven, twenty twenty two, that they periodically would conduct
an analysis of their partner's cash flow, balance sheet, and
(27:02):
financial statements to ensure that appropriate risk ratios and healthy
financial condition of their partners happened, and that they said
their partners were vetted through a risk management process, heavily
implying that said process would protect their customers. And on
October twentieth, twenty twenty two, less than a month before,
the winklevoss Is frozen withdrawals from Gemini Earn, leaving their
(27:24):
customers unable to access their funds or their interest digital
currency groups. CEO Barry Silbert, also the owners of Genesis,
met with Cameron Winklevoss and told him that Gemini was
Genesis Capital's largest and most important source of capital, and
that they couldn't withdraw Gemini earned customers funds without bankrupting
the firm. Cameron and Tyler Winklevoss not only deceived customers,
(27:47):
but turned their assets into a load bearing part of
Genesis's balance sheet so that they could funnel them into
billions of dollars of loans, which would then go into
places like Three Arrows Capital and FDx. And the Winklevosses
have spent the best part of a year playing the
victim with pathetic open letters that they post on Twitter
to Barry Silbert, demanding the returns of funds that they
(28:10):
knew were gone, claiming that Silbert hid in his ivory
tower and he should take responsibility and do the right thing,
as Cameron and his brother continued to mislead the world
about what actually happened. While I'd never refer to the
Winklevosses as victims, one cannot ignore how thoroughly fraudulent Barry
(28:31):
Silbert's empire had become. On January twenty fourth, twenty twenty two,
Genesis Capital loaned one hundred million dollars to DCG, the
company that owned it, due on July twenty fourth, twenty
twenty two, only for Digital Currency Group to tell them
that they and I quote the suit literally did not
have the money. Barry Silbert's solution was to and I
(28:53):
quote repaper the loan, delaying its due date by ten
months to May twenty twenty three, and you'll be surprised
to hear that they never actually paid it back, along
with several other loans that were either unpaid or paid
back in shares of another part of Digital Currency Group
called Greyscale Bitcoin Trust, another enterprise involved in crypto. According
(29:15):
to Sam Bankman Freed's testimony during his own criminal fraud
and conspiracy trial, Barry Silbert begged him for help, which
he declined to provide, despite Genesis Capital having loaned FDx
billions of dollars in the past, which trustees agreed to
settle for a puzzling one hundred and seventy five million dollars.
And just to be clear, the bankruptcy trustee just was
(29:37):
just like, I'll take one hundred and seventy five million.
I don't need the billion back, and one can really
see where they misled Gemini and the Winklevoss brothers. The
one point one billion dollar promisory note from Digital Currency
Group to Genesis, the one that was completely fake and
was literally just words on paper, was marked in genesis
balance sheet, which Gemini was occasionally shown as one point
(29:59):
one b billion dollars in receivables from related parties, with
no designation of what it was or how it was amortized.
In plain English, that just means to any financial analysis
that would appear as just money in the bank. We
are receiving cash from someone one point one billion dollars actually,
and that's good. That would make you a little bit calmer. However,
(30:21):
one cannot ignore the fact that Gemini knew that something
was up. In a March fifth, twenty twenty one email
to an earn investor, Gemini claimed that Genesis was and
I quote only lending assets to posited it inter earned
to institutional borrowers in an overcollateralized way. Overcollateralization meaning that
they were loaning more money than they were borrowing. How
(30:45):
does that work? It doesn't. Gemini never sought to correct
a coin Desk article from February twenty twenty one that claimed,
and I quote that the Genesis loans are overcollateralized, the
loans in question being the ones where Gemini earned funds.
The funds that people put into Gemini earned to earn
interest were going It's all just a big pile of
(31:08):
dog shit. In May twenty twenty one, Gemini's risk management
(31:28):
team determined that Genesis Capital was and I quote highly leveraged,
with an over ninety five percent debt to asset ratio,
meaning that most of their money was in debt rather
than things they actually had, and that Genesis has low
liquidity and that the business is just able to cover
its short term obligations. Think of it like living paycheck
(31:49):
to paycheck to the tune of billions. By August twenty
twenty one, Gemini Earn had placed three billion dollars of
customer assets in Genesis's hands, and this whole situation enrages me.
This is one of the largest and most gratuitous acts
of negligence in the history of finance, a craven and
(32:10):
deliberate swindle that flowed through every vein of the organization.
Gemini intentionally and repeatedly misled customers into investing in an
undercollateralized and risky lender by dressing their fraud in the
trappings of conventional retail banking. Gemini was well aware and
continually reminded of how unstable and disorganized Genesis was and
(32:35):
how risky its customer's assets were held, and yet it
continued to hype the scheme in the hopes that nothing
would ever change. They put billions of dollars into an
entity that from the very beginning they knew was rotten.
They knew could barely cover their bills. They could have
predicted this, and indeed they tried to. They just wanted
(32:56):
to keep the party going. Cameron and Tyler Winklevos are villains,
and while they didn't outright steal customer funds, they intentionally
and willfully misled customers into investing in Genesis Capital, an
unstable and recklessly managed lender. They were fully aware of
these dangers, yet they chose to launch a program that
(33:19):
their own risk management team believed was riskier than other
partners that Gemini had considered loaning that money to, saying
in February twenty twenty two, the Genesis Finances were weaker,
with a higher leverage ratio and low liquidity ratio, meaning
that they were more risky and they had less money
to give back to customers when they need it. And indeed,
(33:40):
they worried that a market downturn would mean that a
fifty to sixty percent default rate for Genesis was an
appropriate assumption, meaning that more than half of their loans
would go under, and that a market downturn would mean
that a fifty to sixty percent default rate for Genesis
loans was an appropriate assumption, meaning that more than half
of their loans default in the event that there was
(34:01):
a change in the cryptocurrency market. The risk management team
repeated this language several times, and it took until May
twenty twenty two for Cameron Winklevoss to personally ask for
a one pager on the risk profile of Gemini Earn
and Genesis, the company that they had lent at that
time of rebillion dollars two and indeed whether Ern adequately
compensated Gemini for the risk. In plain English, they were saying,
(34:25):
in a war, is it really worth it for us
to risk all of this customer money? And when they
said worth it, they mean is it making us enough
money for the pain in the ass we're creating. I
hope it wasn't. I hope they burned for this one.
Having read the entire New York Attorney General suit, I
cannot find a single instance of concern for the hundreds
(34:48):
of thousands of people the Gemini and Cameron and Tyler
Winklevoss failed despite Gemini's pledge to uphold and I quote,
the highest level of fiduciary obligations. The Winklevosses represent their
position as the trusted stewards of the digital currency industry,
claiming to live by a policy of asking for permission
(35:08):
rather than forgiveness, as they brazenly funneled billions of dollars
of customer funds into a lender that they clearly didn't trust.
They ignored the science, they ignored the risk management profiles,
they ignored the worries, and they continually rambled about being
licensed and regulated by the New York Department of Financial Services,
which means absolutely nothing. As Gemini earned deposits were being
(35:32):
loaned to Genesis for the terms of Gemini Earns agreement,
which in turn took them out of the regulation of
the mydfs. The Winklevosses, the so called self regulators of crypto,
according to Paul Vinya of The Wall Street Journal, built
a reputation as the trustworthy party in a lawless industry,
(35:52):
only to use it as a means of making twenty
two million dollars in agent fees and ten million dollars
in commission from risking billions of dollars of customer funds
and in this case Gemini earned customers are likely going
to lose forty to fifty percent of their holdings if
they get anything back at all. A good comparison point
(36:13):
here is the creditors related to Voyager, which was another
cryptoponzi scheme, only got back thirty five percent of their holdings.
Now I have to get into some more annoying financial stuff.
You'll forgive me. I just want you to know how
loathsome these wet river giants are. These boat boys have
really buggered this up. In October twenty twenty three, the
(36:36):
Winklevosses filed something called an adversary proceeding in court against
Genesis in bankruptcy court to be specific, seeking to recover
one point six billion dollars in value for the benefit
of earned users in an attempt to paper over their
financial mismanagement. On August fifteenth, twenty twenty two, Gemini accepted
over thirty point nine million shares of Greyscale Bitcoin Trust,
(36:58):
a STOG tied to the price of bitcoin, with the
minimum investment of fifty thousand dollars and the ticker of GBTC.
They accepted this as collateral for customer funds invested in
Gemini Earn, valued at the time at around fifteen bucks apiece,
somehow taking on what they call an and I quote
initial collateral stake over a year after the program started,
just to be clear, no collateral when they learned the
(37:19):
money out. It was worth around four hundred and sixty
three million dollars at the time, and the Winklevosses for
some reason decided to foreclose upon it on November sixteenth,
twenty twenty two, selling it when its price was around
nine dollars a share. This left them with two hundred
and eighty four million dollars a little bit over that,
or roughly sixty four point one percent of its original value.
(37:41):
They didn't have to sell it, and indeed, one might
argue they legally shouldn't have because it was collateral from alone,
in the same way that the bank can't immediately foreclose
in your home when you're in it and you've missed
a few payments. They probably weren't meant to do so,
But I continue now. The Winklevosses are claiming that they
should be considered oded. The difference between two hundred and
(38:02):
eighty four million dollars and the amount oede to earns creditors.
Genesis argues, I should say, the bankruptcy trustee of Genesis,
which has no interest in anything to do what Genesis
is doing other than getting money back for the creditors,
most of which are institutional customers, come last. That trustee
is arguing that it actually didn't give Gemini two hundred
(38:24):
and eighty four million dollars in credit. They gave them
thirty million, nine hundred and five thousand, seven hundred and
eighty two shares of GPTC, and that the collateral should
be valued at the price of GBTC today, which would
value the stake that they had given them at eight
hundred million. This is confusing, but what you need to
realize is Gemini earned customers have lost somewhere between eight
(38:45):
hundred million and a billion dollars. Had the Winklevosses not
sold their shares, they would have got a lot more back.
In essence, the Winklevosses rushed to sell these shares for
effectively no reason, potentially flaunting very basic foreclosure rule, and
Genesis argument is that they shouldn't have to make up
the difference for their massive fuck up. Interestingly, Gemini was
(39:07):
also meant to receive another thirty one million shares of
GPTC on November tenth, twenty twenty two, and Genesis just
didn't send it. And guess what the bankruptcy court isn't
going to help with that. Let's be clear, both of
these parties are scum, and in a just society, they'd
rotten the depths of the worst jails under the terms
of genesis reorganization plan. Under bankruptcy, Gemini earn customers those people,
(39:33):
regular people, the people's college funds, the bar mits for funds,
the single mothers who had lost their money. They'd be
considered Class four unsecured creditors getting paid out behind Genesis
institutional creditors, secured creditors and priority claims, which is why
Genesis had to pay one hundred and seventy five million
dollars to fdx's bankruptcy. A single mothers waited to retrieve
(39:54):
their son's college funds. Yet there may be hope that
Gemini Earned customers will be made whole. Mere hours after
the original broadcast of this podcast, the New York State
Department of Financial Services announced that Gemini had committed to
(40:18):
return at least one point one billion dollars to EARNS customers,
though only after the resolution of Genesis Global Capital's bankruptcy.
Assuming that the bankruptcy courts approved the settlement, Gemini Earned
customers can, according to Gemini, expect to receive approximately ninety
seven percent of their assets in kind within two months
of February twenty eight, twenty twenty four, and the rest
(40:39):
about ten months after that. Unlike the proposed FTX settlement,
customers will also receive the actual crypto they committed. In
the case of FTX, they're getting the dollar equivalent on
the day that FTX went bankrupt, which means they're getting
much less than they'd make if they were selling their
crypto today. This means that these customers might actually make
money because on the day that Gemini Earned shut down,
(41:00):
bitcoin was somewhere between eleven and fifteen thousand dollars. This
means that they're actually going to make a profit somehow,
which is pretty good. It's rare to find good news here,
and don't get too excited yet, though all of this
is dependent on the tedious pace of bankruptcy courts that
in this case especially, we've kind of considered Gemini Earns
customers second class citizens. This landmark settlement is being spun
(41:24):
by the Winkelvoss brothers as and I quote a successful
resolution of Gemini Earn that was reached and I quote
again with Genesis and other creditors, one in which these
identical River twins are considered. And I can't believe they're
willing to say this responsible stewards of the crypto ecosystem.
This couldn't be further from the truth. Superintendent Adrian Harris
(41:46):
of New York State's Department of Financial Services said in
a statement that Gemini had failed to conduct due diligence
on an unregulated third party later accused of massive fraud,
harming EARNED customers who were suddenly unable to access their assets.
The nydfs IS investigation revealed and I quote that Gemini
engaged in unsafe and unsound practices that ultimately threatened the
(42:09):
financial health of the company, and they collected hundreds of
millions of dollars in fees from Gemini customers that could
have gone to Gemini, substantially weakening Gemini's financial condition. The
Winklevosses are not responsible stuarts. They're towering con artists that
got core and they were forced to pay up only
because they ran a foul of one of the few
responsible regulators left in America. While I'm hopeful to earn
(42:33):
customer as a main whole, I also fear that the
bankruptcy courts may drag their feet, and even if they don't,
kind of just want more here. The Winklevosses aren't even
the ones paying the fines. Their company is. Gemini will
pay the thirty seven million dollar fine from the NYDFS,
and I think they're going to pay the one point
one billion dollars in cryptocurrency too. What's weird is I
(42:56):
can find no evidence about where that money is coming from.
I'm also worried that Genesis, as they have multiple times,
will kind of stone wall this deal. They want to
get out of this. They recently settled with the SEC
for twenty one million dollars, so they have a reason
to do well with the US government. But I fear
for this. All of this is condentent on bankruptcy. Courts
(43:18):
don't really care regardless of this landmark settlement. It is great,
it's great that the regulator has got the customer's money back,
but my blood is still boiling. Cameron and Tyler Winklevoss
will continue to run Gemini, which is a multi billion
dollar financial services company, despite the fact that it's very
(43:39):
clear that they really didn't do any due diligence, and
that due diligence which they did they completely ignored. They
knew that this was a bad deal. They sent tens
hundreds over a billion dollars to a company that they
knew as early as twenty twenty one was bordering on insolvent.
Yet they're still allowed to walk around as free men
(44:01):
and stewards of the financial industry. It's kind of taken
the piss and even though the New York Attorney General's
sue is still out there, it's not over yet, and
they're still seeking three billion dollars in restitution. They're doing
so from Gemini and digital currency group, the Winklevosses are
still left unscathed. These are craven fraudsters that continued again
(44:22):
and again to operate without oversight or restrain, and now
they're going to profit handsomely off of an industry built
on the back of manipulating and conning people. And despite
how good this settlement is, these guys are still billionaire
boat boys. They're unscathed. They robbed their own company, they
robbed their customers, They laughed in our faces. And at
(44:44):
this time in society, when tens of thousands of people
are being laid off, when people can't get houses, when
the regular person that cannot seek wealth, people that go
out and fuck over customers again and again and again
in broad daylight, lying to us, lying to you and
me in a way that is so craven, nothing happens
(45:05):
to them. Oh god, they got slightly embarrassed. They can't
be kicked out of Gemini. They own the bloody thing.
The crypto industry isn't attacking them, despite the fact that
two of your so called stewards are fucking con artists.
Anyone who's listening to this, who's a big fan of crypto,
who believes that these guys are good people, or indeed
(45:27):
that really there are any good people in this industry.
Should read the New York Attorney General suit. They should
read everything that the Winklevosses did. They should listen to
this podcast again, perhaps, and recount the many ways, the
manifold ways in which these two giant freaks shat all
over their customers, lied to them, lied to regulators, lied
(45:49):
to their own company, and sat there with their thumbs up,
their asses not digging into their own personal piggybanks, making
the dumbest calls again and again, and nothing has happened
to them. I pray Letitia James and then New York
Attorney General's Office finds a way to exile these two
bastards from this goddamn financial services industry. But I'm gonna
(46:13):
be honest, I'm not holding my breath. Thank you for
listening to Better Offline. It's a weekly tech podcast. You
can find it on iheartradios, app or anywhere else you
find podcasts. The editor and composer of the Better Offline
(46:34):
theme song is Matasowski. You can check out more of
his music and audio projects at matasowski dot com. M
A T T O s o w Ski dot com.
If you want to get in touch with me, email
me at easy at better offline dot com, or visit
me at edzitron on Twitter or zitron dot Besky dot
Social on Blue Sky. Check out my newsletter and more
(46:56):
of my work on better offline dot com. Thank you
for listening.
Speaker 1 (47:06):
Better Offline is a production of cool Zone Media. For
more from cool Zone Media, visit our website Coolzonemedia dot com,
or check us out on the iHeartRadio app, Apple Podcasts,
or wherever you get your podcasts.
All Zone Media.
Speaker 2 (00:05):
Hello and welcome to Better Offline. I'm your host ed Zetron.
This is a weekly tech show where I walk you
through the good, the bad, and the stupid of a
multi trillion dollar industry that's changed and monetized almost every
part of our lives. So you're likely aware of the
(00:32):
tale of Sam Bankman Free, the curly haired fraudster who
conned millions of people out of billions of dollars, crushing
the cryptocurrency markets in the process. He did so by
creating a cryptocurrency exchange called ftx, where people could buy
things like bitcoin and ethereum, except it had one little catch.
He was stealing the customer funds, keeping only a little
(00:52):
around at any given time for people to withdraw. This
meant that when hundreds of thousands of people went to
withdraw their funds at once, the entire scheme fell apart
and FTX collapsed. Bankman Fried currently sits in prison awaiting
sentencing after being convicted and several counts of fraud, including
wirefraud and wirefraud conspiracy, which is appropriate as him and
his co conspirators at one point genuinely used their group
(01:16):
called wirefraud Chat and I am not kidding yet. This
isn't about SBF. There are actually two other villains in
this story, two villains of the recent crypto crash that
you might have missed, despite the fact that they're both
six foot five and lost their customers over a billion dollars.
I'm talking about Cameron and Tyler Winklevoss, two brothers, both
(01:40):
alike in dignity and appearance, the gay notoriety by suing
Mark Zuckerberg of Facebook now known as Metta in the
early days of the social network back in two thousand
and four. In the Winklevi's defense, Zuckerberg dig screw them
as a student at Harvard, where he pretended to work
on the Winklevoss's social network, Harvard Connect while actually working
(02:00):
on the earliest version of Facebook, effectively sabotaging the competition
from within. When Facebook finally launched the identical Moist, Riverboat
Giants alleged that Zuckerberg had stolen their idea for a
social network and used their code, resulting in a year's
long back and forth and a sixty five million dollar
settlement that the Winklevosses were forced by a court to accept.
(02:21):
In twenty eleven, I think the had Zuckerberg kept his
filthy little hands to himself, we'd likely never have heard
of Tyler and Cameron Winkelvoss, and I believe the world
would have been a better place if they weren't already.
The Winklevoss twins were now millionaires. In twenty ten, Aaron
Sorkin's Oscar nominated retelling of the Facebook origin story the
(02:42):
social network would raise their profiles even further, portraying them
as victims of a calculated, misanthropic opportunist, Mark Zuckerberg. Of course,
you could almost feel sorry for them, even if they
were portrayed by Armie Hammer, the famous cannibalism fan and
potentially perverted in enjoyer of other things too. But you
(03:03):
really shouldn't feel sorry for Army Hammer. But you definitely
shouldn't for the Winklevosses either. In the years following their
legal dust up with Mark Zuckerberg, the Winklevoss twins remained
active in the tech scene, launching an investment fund in
twenty twelve that focused on early stage, consumer centric startups.
A year later, they acquired eleven million dollars of bitcoin,
and while it's unclear exactly how much they bought. A
(03:25):
New York Times article about their acquisition, which of course
featured no verification of that actual purchase, ran on April eleventh,
twenty thirteen, when bitcoin was around one hundred and fourteen
dollars apiece, meaning that the Winklevoss brothers likely bought somewhere
in the region of ninety thousand bitcoin. Based on today's valuation,
those holdings would be worth an excess of three point
(03:46):
eight billion dollars. It was a big, stupid bet, and
it absolutely paid off. In the same year, they'd pursue
creating a bitcoin exchange traded fund also known as an ETF,
a thing that allows you to invest in something, in
this case bitcoin, much like you would trading a stock,
without all of the complexity and risk associated with actually
(04:07):
owning the thing in question, in this case bitcoin. While
this never materialized, the winklevoss Is cozied up with New
York's Department of Financial Services and realized they could found
their own cryptocurrency exchange to rival the other American rival, Coinbased,
which had launched two years earlier. A cryptocurrency exchange, as
I've discussed, is a place where you can buy and
(04:28):
sell your crypto using generally a credit card or a
debit card. At the time very focused on debit cards,
though in twenty fifteen they launched Gemini, what would eventually
become a major and highly respected cryptocurrency exchange that from
the very beginning tried to swaddle its ugly and often
fraudulent industry in a blanket of legitimacy, winning approval from
(04:48):
New York state regulators to provide certain financial services. Gemini
now sits as one of the top ten largest cryptocurrency
exchanges in the world and one of the few remaining
American exchange. One might be forgiven for thinking they were trustworthy,
and they'd be wrong. Toward the end of twenty twenty,
the price of cryptocurrencies began to climb rapidly, with bitcoin
(05:11):
climbing from nineteen thousand dollars in December to over forty
thousand dollars in January, cresting over fifty thousand dollars a
bitcoin by March twenty twenty one. The cryptocurrency industry would
see more venture investment in the first quarter of twenty
twenty one than it had in the entirety of twenty twenty,
with one hundred and twenty nine crypto and blockchain startups
receiving two point six billion dollars in the space of
(05:33):
three months, compared to three hundred and forty one cryptocurrencies
receiving two point three billion in the entirety of twenty twenty.
As an explanation for those listeners that don't know, venture
capital investments are generally investing inequacy in the companies. They
buy a piece of the company for a certain amount
of money, venture capitalists, of course, taking the risk that
(05:54):
the company will fall apart. What differs with a lot
of these companies is that they will sometimes sell you
a token. This isn't necessarily relevant for this story. I
just want you to know the fact that this industry
at its core is based on the idea of basically
selling securities, you know, like stocks, but hiding from the
law and conning people. That's not how the Winklevosses fucked
(06:18):
people over, though, no. So another thing to realize about
these crypto companies is that they didn't really do anything.
They'd sell tokens. They would claim that they would build
something in the future on something called a roadmap. They
would sometimes have a white paper which would describe some
underlying technological stuff. But there are really none of them
that had a feature or a function. They were mostly
(06:41):
just nonentities that promise things. But because you could trade
their tokens, which much like a stock, should have been
regulated by the government, but were not because they were
such new financial devices and objects. Well, this whole market
was growing and growing and growing, and along with it,
(07:02):
the Winklevosses were getting even richer. Then they got greedy.
To understand how the Winklevosses bungled a billion dollars, I
have to give you a little bit of background on
the last few years of hell in the cryptocurrency industry.
In February twenty twenty one, Gemini, that's their cryptocurrency exchange
where you could buy and sell different cryptocurrency began something
(07:23):
called Earn, their Earn program. It was an interest earning
program where users could feed their cryptocurrency like Bitcoin, for example,
into Gemini through a few clicks and earn interest. And
you should put quotation marks around those so you would
get a percentage return on the crypto that you put
into Gemini Earn. One might be forgiven for believing that
(07:46):
as a result, they were putting money into some sort
of secure protected account like a certificate of deposit. They
really were not, I must be clear, how not like
a bank. This was Gemini, a New York based trust
company that promised to security protocols on par with those
offered by top financial institutions. Claimed to generate this interest
by working with and I quote institutional borrowers who were
(08:10):
partners who had been vetted through Gemini's and I quote
again risk management framework. What's also important to know is
that none of what you're about to hear was the
security issue. It was entirely the result of two greedy
riverboat giants pissing away money because they were greedy little pigs.
And as a result of trusting this company that was
(08:31):
a trust company, a New York based trust company, a
regulated one allegedly, but not regulated for the thing that
I'm about to tell you, people trusted them, and as
a result, customers deposited somewhere between seven hundred million and
a billion dollars of funds into Gemini Earn, believing that
Gemini was offering something akin to an interest generating savings account.
(08:52):
After all, Gemini had institutional partners, and that is plural.
That's what they said and they had vetted said partners
through their collateralization management process, which means, in the case
of a loan, you collateralize the loan, you give them something.
For example, you would collateralize the loan for a house
by giving them a down payment of twenty percent. In
the case of a loan, you might borrow a certain
(09:14):
amount of money, but put some money down so they
have something in the event that you default on the loan.
In plain English, they were claiming to work with institutional
investors like banks and hedge funds that would pull Gemini
earn customers, so people giving them their Bitcoin ethereum and
all that they would pull those resources to allow them
to get involved in big trades with better returns than
(09:36):
users will be able to get on their own. Indeed,
classical financial markets have larger loans that have preferential rates
and get involved in deals that the regular customer would
not be able to. That's what people thought they were getting.
The other suggestion was that Gemini had diversified its risk
and there's actually an archived version of the Gemini earned
Patron twenty twenty one that said that Gemini worked with
(09:58):
multiple accredited party borrowers to do so. As a result,
as a customer, you may believe, well, if one fails,
that won't be the end of the world. Right. It's
also important explaining that the way that a lot of
these companies in crypto made their money was by loaning
it to others in the form of margin trading, where investors,
(10:20):
both retail and institutional, borrowed a massive amount of cryptocurrency
in returned for collateral which was usually less than the
amount they were borrowing. As I mentioned, kind of like
putting a damn payment for a house, except the asset
is a token on a blockchain like bitcoin. In fact,
as you'll find out, most of the cryptocurrency industry was
(10:41):
held up by these loans. Now, all of this supposedly
legal and cool and normal stuff. All this sounded very trustworthy.
This was, of course not the case. Neither was it
the case that Gemini had diversified their investments at all,
or actually really any risk management of any kind. Although
(11:02):
Gemini had the outward appearance of being a highly diversified,
sophisticated and well run financial services business, it actually wasn't.
They placed the vast majority of their eggs in one
single basket, and that was a cryptocurrency brokerage called Genesis.
Genesis provided a variety of cryptocurrency related services for large
(11:25):
institutional investors and high net worth individuals. Their money was
made by offering these institutions and individuals loans leveraged by
their cryptocurrency, which Genesis would in turn invest, theoretically profiting
in the process through their access to large deals. As
I previously mentioned, when I say leverage, I mean the
(11:45):
very simple thing of I give you some money and
then you lend me money in return, and there is
usually some sort of interest deal, or there is some
way where both parties benefit. Sometimes it will be that
they are borrowing an asset like bitcoin. The price can change,
then the collateral they give maybe an excess of the
amount they're borrowing in dollars, but the price of bitcoin
(12:07):
may go down. Thus, as a result, if I loaned
somebody a billion dollars a bitcoin, but the price of
bitcoin went down and they gave me, I don't know,
one point something billion in return, They're gambling the idea
that bitcoin will go up from there, and I'm gambling
that it will go down, and I would have made
money on that loan. This is a messy stupid assholes
industry one built on sand and you're about to find
(12:29):
out how badly it can go. So Genesis was also
part of a huge empire called the Digital Currency Group,
a holding company for multiple different parts of the cryptocurrency ecosystem,
including cryptocurrency news outlet coin Desk, which ironically was a
large part of the reason that Sam Bankman Freed has
gone to prison. I could do an entire episode on
(12:52):
this company, but all you really need to know is
that they own Genesis, and while Genesis was meant to
be independent, it absolutely was not. And what's really important
to know is how stupidly Genesis was run. They weren't
simply bad at investing. They were so bad at investing
that they somehow managed to invest in not one, but
two of the entities that brought down the entire cryptocurrency
(13:15):
industry in twenty twenty two. Their first mistake was investing
two point four billion dollars in Three Arrows Capital, a
major cryptocurrency hedge fund that ended up being a significant
scam that also led to the collapse of FTX, the
other entity that Genesis had trusted with its capital, and
again that's the subject of another episode. Three Arrows Capital
(13:37):
was a Singapore based cryptocurrency hedge fund with over a
decade worth of history. Run by two guys. It started
life in arbitrage, essentially making money on the differences in
prices of products in two separate locations, with a niche
in smaller traditional currencies like the ty bart and the
Indonesian Rupia. This business model often relied on a healthy
relationship with legacy banks. We had some success on that front.
(14:01):
It's relationship soured in twenty seventeen, forcing the company to
pivot to the wild West of cryptocurrency. It started investing
its client's money in early stage crypto projects, hoping for
a big return when their values went up. One of
these projects was terror Lunar, an algorithmic stable coin which,
in plain English is meant to be a cocoon on
the Ethereum blockchain that is always related to the price
(14:23):
of a dollar, except in this case. You may have
heard that word algorithmic. You know what The problem with
algorithms is they need to be perfect in they almost
never are. But this bit kind of requires some explanation,
so bear with me. Cryptocurrencies like Bitcoin and Ethereum, they're
wildly volatile, which is bad if you want to actually
(14:46):
transact with them. If a currency could be twenty five
percent more or less the next day, how do you
actually know what to charge for something? And that's where
stable coins come in. These are cryptocurrencies that aim to
fix their value to that of a traditional fiat currency
like the US dollar or the Euro. Most stable coins have,
(15:06):
or say they have, at least a cash reserve equivalent
to the amount of tokens in circulation. Terror Lunar differed
using an algorithm to maintain price parity rather than any reserves.
The algorithm worked until it suddenly and violently did not.
On May third, twenty twenty two, a Terror stable coin
(15:26):
was worth one dollar. A few days later, it was
worth a fraction of a penny. The Bearre offline theme
song by Mattasowski will be dropping this Friday, March first,
(15:46):
on all streaming platforms. You can find the Spotify presab
link in the episode notes. Terr Luna collapsed in May
(16:11):
twenty twenty two with the loss of forty five billion
dollars in market capitalization, meaning the total value of all
of the tokens on the blockchain. Three arrows capital's entire
five hundred million dollar position in Lunar was now effectively worthless.
This collapse also shaved off and estimated one trillion dollar
(16:33):
value from the wider crypto market. Three Arrows Capital, the
so called hedge fund to quote research firm fs insight,
was an old fashioned, made off style Ponzi scheme where
founders Suzo and Carl Davis would use client funds to
borrow from basically anywhere that would let them in the
entire crypto ecosystem. And because Three Arrows didn't bother collateralizing
(16:55):
these loans sufficiently or managing the risk behind them, there
was very little money to turn to customers. The failure
of Three Arrows Capital left a multi billion dollar hole
in Genesis balance sheet that if paypered over with a
one point one billion dollar promissory note from its holding company,
Digital Currency Group that was due in twenty thirty two.
(17:18):
This sounds like it would be helpful, right. The problem
is this maneuver never appeared to involve the conveyance of
any actual money. It pretty much existed only to pretend
that Genesis had another one point one billion dollars on
the books. To be abundantly clear, no money actually ever
got sent to anybody. This promissory note only existed to
(17:39):
mislead creditors about the financial health of Genesis. As you
can understand, those creditors would probably want to know, well, okay,
do you have enough money in case we need our
money back? Little bit of a spoiler for you, they didn't.
The Terror Lunar and Three Arrows capital fiasco trash the
value of cryptocurrencies, with Bitcoin dropping from around thirty thousand
(18:00):
in mad twenty twenty two to less than twenty grand
in October. And in November twenty twenty two, ftx collapsed
as a result of the coin Desk article, again owned
by DCG, that revealed that most of ftx's assets were
held in FTT, a token that they owned the majority
of and could never sell because doing so would crash
the FTT market, making said asset worthless. Indeed, in cryptocurrency,
(18:22):
this is a big problem. If you have a big
market and say there's twenty billion dollars of a token
out there, but one person owns a billion of it,
they actually can't sell it because in doing so, the
market would suddenly think, oh, this is worthless because someone
wants to dump him. The results of this revelation that
FTX was holding most of the world's FTT and thus
(18:44):
could never sell it, and indeed that in the process
made their company pretty much insolvent. This left both retail
investors and institutional investors out to dry. Now eager ide
and eager eared listeners may have probably guessed by this
point that Genesis was inexhoribly entangled in this disaster, quickly
(19:04):
going from saying that they had no material exposure to
FDx on November eight, twenty twenty two, to then saying
they had seven million dollars of exposure on November tenth,
to saying that they had one hundred and seventy five
million dollars in exposure a day later, to saying that
they needed to freeze all customer withdrawals and new loans
entirely and that they would likely be going bankrupt, which
(19:24):
they said on November eighteenth, twenty twenty two. They entered
Chapter eleven bankruptcy. In the early twenty twenty three. The
Digital Currency Group, which of course owns Genesis, had also
borrowed five hundred and seventy five million dollars from them,
which has since led to the hilarious situation of Genesis,
suing the company that owns it as part of its
own bankruptcy proceedings. This is the company that the Wingovoss
(19:47):
twins and Gemini their cryptocurrency exchange, had allegedly run through
their risk management framework and despite allegedly reviewing the collateralization
management process that Genesis underwent, which means how they lateralized
the loans, what money they took in to make sure
that the loans did not just fall apart if something
bad happened. Well, Gemini hadn't diversified their investments at all.
(20:10):
They put over a billion dollars of customer funds into Genesis,
money which is most likely gone now. In many respects,
Gemini was the cryptocurrency equivalent of Green Seal Capital, a
company that at one point was the highest profile lender
in the supply chain financing space, touting former British Prime
Minister David Cameron as one of its advisors. Like Gemini,
(20:31):
green Seal Capital pretended to be a diversified business, when
in reality it borrowed money from large institutional investors to
lend to a handful of companies. The circumstances behind its
collapse are slightly more complicated than those of Genesis, but
not by much. Green Sill's implosion in twenty twenty one
rippled throughout the industry, contributing to the demise of the
already troubled credit sueese which were acquired really they were
(20:53):
rescued by UBS in early twenty twenty three for the
bargain price of just three point twenty five million dollars.
Since November twenty twenty two, when Gemini froze, withdrawals from
Gemini earned the interest bearing account, the Winklevosses and Barry Silbert,
CEO of Digital Currency Group, who, as I've mentioned, are
technical owners of Genesis, have engaged in an embarrassing back
(21:15):
and forth publicly on Twitter, where the Winklevosses have attempted
to frame themselves as victims of a scam rather than
bad actors acting badly. If they were remotely competent, they
could have yanked their customers' funds the ones loaned to
Genesis from the Gemini ern program. When it was revealed
that Genesis loaned two point four billion dollars for three
(21:35):
hourrows capital in July of twenty twenty two, call it
what you want. Prudent's diligence or just risk management, but
it would have been the sensible thing to do, unless,
of course, they didn't believe they'd be able to get
the money out. On October nineteenth, twenty twenty three, New
York Attorney General Letitia James filed a massive fraud suit
(21:55):
against Gemini, Genesis Global Capital, and Digital Currency Group, ring
a conspiracy to mislead customers and cover up of rebillion
dollars of losses. The Attorney General's office found that the
twin brothers named Cameron and Tyler Winklevoss had misled investors
about the risks associated with Genesis, and that Genesis not
only failed to disclose its losses, but took steps to
(22:19):
actively hide them from their clients and the public. The
New York Attorney General's suit is damning and shows that
Gemini was well aware of the rotten condition of Genesis
from the launch of the program in twenty twenty one.
With Gemini and I quote the Attorney General suit here
their internal risk analysis showing that Genesis Capital's loan book
(22:41):
was undercollateralized, which means that they did not have enough
money to give back the money that they owed to
their customers and that only a year into the program,
Gemini revised its estimate of Genesis Capital's credit rating, which
is the way in which you measure whether a creditor
or someone who is borrowed or loaning money whether they're
(23:02):
worthy of doing so. They provised its testiment of their
credit rating from an investment grade of BBB to a
non investment or junk grade of CCC. Don't need to
get too technical here, just know that's pretty bad. Genesis
also routinely reported to Gemini from May twenty twenty two
through November twenty twenty two that he had failed its
own internal loan book risk assessments, to the point that
(23:24):
in July twenty twenty two, a Gemini board member compared
Genesis Capital to Layman Brothers prior to the financial collapse
of two thousand and seven and two thousand and eight.
At this point, you're probably thinking, so all the money's
gone and your raim. Gemini and the Winklevosses decided they
would terminate the EARN program on September second, twenty twenty two,
(23:46):
but only decided to inform Genesis that it would do
so on October thirteenth, twenty twenty two. It continued to
send customer funds to Genesis throughout this period until an
indeterminate time, with all of this information coming from the
Attorney General's suit, and they failed to let customers know
that the program was fully terminated until January twenty twenty three,
(24:08):
though I should add that they froze with drawals in
November twenty twenty two. All of these dates are very confusing,
but the important facts to know is that Gemini knew
from twenty twenty one that they were sending customer funds
into an unreliable, unstable, undercollateralized lender for years, and indeed,
(24:28):
even when they froze their own program when they decided
that the party had to stop in September twenty twenty two,
they were still taking customer funds and putting it in
Genesis's hands. They didn't freeze the withdrawal process, the way
in which customers have withdrawn their funds, until November twenty
twenty two, So that's months of throwing customer money into
(24:52):
the toilet and aggressively flushing it like you're trying to
get rid of a basketball. They knew. Cameron and Tyler
Winklevos knew. They knew what they were doing. They knew
they were losing customers money, and they didn't care. Two
American billionaires put a billion dollars of customer funds into
(25:17):
deeply questionable lenders' hands, then proceeded to obfuscate the risks involved.
They claimed that Genesis had appropriate risk ratios and healthy
financial condition as recently as November fourteenth, twenty twenty two,
a full month after it had formerly terminated their agreement
with Genesis, who was the company that they were lending
(25:38):
this too. This wasn't a casual fling with a risky
asset class. It was a near billion dollar swindle of
and I quote Cameron Winklevoss in his abominable letter to
Barry Silbert, a swindle of a single mother who lent
her son's education money to them, a father who lent
(25:59):
his sons by me for money to Gemini earn, a
husband and a wife who lent their life savings. A
school teacher who lent his children's college funds. Cameron and
Tyler Winklevoss, as well as Barry Silbert, who runs Digital
Currency Group and by proxy, Genesis, have defrauded investors at
(26:19):
a similar scale to Sam Bankman freed. As I mentioned
the disgraced and now incarcerated CEO of FTX, They convinced
customers that they were putting money into an interest generating account,
tricking them into believing that this was a stable, risk
managed investment, one that was continually liquid, and they indeed
advertised that you could withdraw your assets instantly, as opposed
(26:41):
to the reality that Cameron and Tyler Winklevoss knowingly funneled
customer funds into an unstable undercollateralized lender. They intentionally and
repeatedly misled customers, claiming to an Earn investor on June
twenty seven, twenty twenty two, that they periodically would conduct
an analysis of their partner's cash flow, balance sheet, and
(27:02):
financial statements to ensure that appropriate risk ratios and healthy
financial condition of their partners happened, and that they said
their partners were vetted through a risk management process, heavily
implying that said process would protect their customers. And on
October twentieth, twenty twenty two, less than a month before,
the winklevoss Is frozen withdrawals from Gemini Earn, leaving their
(27:24):
customers unable to access their funds or their interest digital
currency groups. CEO Barry Silbert, also the owners of Genesis,
met with Cameron Winklevoss and told him that Gemini was
Genesis Capital's largest and most important source of capital, and
that they couldn't withdraw Gemini earned customers funds without bankrupting
the firm. Cameron and Tyler Winklevoss not only deceived customers,
(27:47):
but turned their assets into a load bearing part of
Genesis's balance sheet so that they could funnel them into
billions of dollars of loans, which would then go into
places like Three Arrows Capital and FDx. And the Winklevosses
have spent the best part of a year playing the
victim with pathetic open letters that they post on Twitter
to Barry Silbert, demanding the returns of funds that they
(28:10):
knew were gone, claiming that Silbert hid in his ivory
tower and he should take responsibility and do the right thing,
as Cameron and his brother continued to mislead the world
about what actually happened. While I'd never refer to the
Winklevosses as victims, one cannot ignore how thoroughly fraudulent Barry
(28:31):
Silbert's empire had become. On January twenty fourth, twenty twenty two,
Genesis Capital loaned one hundred million dollars to DCG, the
company that owned it, due on July twenty fourth, twenty
twenty two, only for Digital Currency Group to tell them
that they and I quote the suit literally did not
have the money. Barry Silbert's solution was to and I
(28:53):
quote repaper the loan, delaying its due date by ten
months to May twenty twenty three, and you'll be surprised
to hear that they never actually paid it back, along
with several other loans that were either unpaid or paid
back in shares of another part of Digital Currency Group
called Greyscale Bitcoin Trust, another enterprise involved in crypto. According
(29:15):
to Sam Bankman Freed's testimony during his own criminal fraud
and conspiracy trial, Barry Silbert begged him for help, which
he declined to provide, despite Genesis Capital having loaned FDx
billions of dollars in the past, which trustees agreed to
settle for a puzzling one hundred and seventy five million dollars.
And just to be clear, the bankruptcy trustee just was
(29:37):
just like, I'll take one hundred and seventy five million.
I don't need the billion back, and one can really
see where they misled Gemini and the Winklevoss brothers. The
one point one billion dollar promisory note from Digital Currency
Group to Genesis, the one that was completely fake and
was literally just words on paper, was marked in genesis
balance sheet, which Gemini was occasionally shown as one point
(29:59):
one b billion dollars in receivables from related parties, with
no designation of what it was or how it was amortized.
In plain English, that just means to any financial analysis
that would appear as just money in the bank. We
are receiving cash from someone one point one billion dollars actually,
and that's good. That would make you a little bit calmer. However,
(30:21):
one cannot ignore the fact that Gemini knew that something
was up. In a March fifth, twenty twenty one email
to an earn investor, Gemini claimed that Genesis was and
I quote only lending assets to posited it inter earned
to institutional borrowers in an overcollateralized way. Overcollateralization meaning that
they were loaning more money than they were borrowing. How
(30:45):
does that work? It doesn't. Gemini never sought to correct
a coin Desk article from February twenty twenty one that claimed,
and I quote that the Genesis loans are overcollateralized, the
loans in question being the ones where Gemini earned funds.
The funds that people put into Gemini earned to earn
interest were going It's all just a big pile of
(31:08):
dog shit. In May twenty twenty one, Gemini's risk management
(31:28):
team determined that Genesis Capital was and I quote highly leveraged,
with an over ninety five percent debt to asset ratio,
meaning that most of their money was in debt rather
than things they actually had, and that Genesis has low
liquidity and that the business is just able to cover
its short term obligations. Think of it like living paycheck
(31:49):
to paycheck to the tune of billions. By August twenty
twenty one, Gemini Earn had placed three billion dollars of
customer assets in Genesis's hands, and this whole situation enrages me.
This is one of the largest and most gratuitous acts
of negligence in the history of finance, a craven and
(32:10):
deliberate swindle that flowed through every vein of the organization.
Gemini intentionally and repeatedly misled customers into investing in an
undercollateralized and risky lender by dressing their fraud in the
trappings of conventional retail banking. Gemini was well aware and
continually reminded of how unstable and disorganized Genesis was and
(32:35):
how risky its customer's assets were held, and yet it
continued to hype the scheme in the hopes that nothing
would ever change. They put billions of dollars into an
entity that from the very beginning they knew was rotten.
They knew could barely cover their bills. They could have
predicted this, and indeed they tried to. They just wanted
(32:56):
to keep the party going. Cameron and Tyler Winklevos are villains,
and while they didn't outright steal customer funds, they intentionally
and willfully misled customers into investing in Genesis Capital, an
unstable and recklessly managed lender. They were fully aware of
these dangers, yet they chose to launch a program that
(33:19):
their own risk management team believed was riskier than other
partners that Gemini had considered loaning that money to, saying
in February twenty twenty two, the Genesis Finances were weaker,
with a higher leverage ratio and low liquidity ratio, meaning
that they were more risky and they had less money
to give back to customers when they need it. And indeed,
(33:40):
they worried that a market downturn would mean that a
fifty to sixty percent default rate for Genesis was an
appropriate assumption, meaning that more than half of their loans
would go under, and that a market downturn would mean
that a fifty to sixty percent default rate for Genesis
loans was an appropriate assumption, meaning that more than half
of their loans default in the event that there was
(34:01):
a change in the cryptocurrency market. The risk management team
repeated this language several times, and it took until May
twenty twenty two for Cameron Winklevoss to personally ask for
a one pager on the risk profile of Gemini Earn
and Genesis, the company that they had lent at that
time of rebillion dollars two and indeed whether Ern adequately
compensated Gemini for the risk. In plain English, they were saying,
(34:25):
in a war, is it really worth it for us
to risk all of this customer money? And when they
said worth it, they mean is it making us enough
money for the pain in the ass we're creating. I
hope it wasn't. I hope they burned for this one.
Having read the entire New York Attorney General suit, I
cannot find a single instance of concern for the hundreds
(34:48):
of thousands of people the Gemini and Cameron and Tyler
Winklevoss failed despite Gemini's pledge to uphold and I quote,
the highest level of fiduciary obligations. The Winklevosses represent their
position as the trusted stewards of the digital currency industry,
claiming to live by a policy of asking for permission
(35:08):
rather than forgiveness, as they brazenly funneled billions of dollars
of customer funds into a lender that they clearly didn't trust.
They ignored the science, they ignored the risk management profiles,
they ignored the worries, and they continually rambled about being
licensed and regulated by the New York Department of Financial Services,
which means absolutely nothing. As Gemini earned deposits were being
(35:32):
loaned to Genesis for the terms of Gemini Earns agreement,
which in turn took them out of the regulation of
the mydfs. The Winklevosses, the so called self regulators of crypto,
according to Paul Vinya of The Wall Street Journal, built
a reputation as the trustworthy party in a lawless industry,
(35:52):
only to use it as a means of making twenty
two million dollars in agent fees and ten million dollars
in commission from risking billions of dollars of customer funds
and in this case Gemini earned customers are likely going
to lose forty to fifty percent of their holdings if
they get anything back at all. A good comparison point
(36:13):
here is the creditors related to Voyager, which was another
cryptoponzi scheme, only got back thirty five percent of their holdings.
Now I have to get into some more annoying financial stuff.
You'll forgive me. I just want you to know how
loathsome these wet river giants are. These boat boys have
really buggered this up. In October twenty twenty three, the
(36:36):
Winklevosses filed something called an adversary proceeding in court against
Genesis in bankruptcy court to be specific, seeking to recover
one point six billion dollars in value for the benefit
of earned users in an attempt to paper over their
financial mismanagement. On August fifteenth, twenty twenty two, Gemini accepted
over thirty point nine million shares of Greyscale Bitcoin Trust,
(36:58):
a STOG tied to the price of bitcoin, with the
minimum investment of fifty thousand dollars and the ticker of GBTC.
They accepted this as collateral for customer funds invested in
Gemini Earn, valued at the time at around fifteen bucks apiece,
somehow taking on what they call an and I quote
initial collateral stake over a year after the program started,
just to be clear, no collateral when they learned the
(37:19):
money out. It was worth around four hundred and sixty
three million dollars at the time, and the Winklevosses for
some reason decided to foreclose upon it on November sixteenth,
twenty twenty two, selling it when its price was around
nine dollars a share. This left them with two hundred
and eighty four million dollars a little bit over that,
or roughly sixty four point one percent of its original value.
(37:41):
They didn't have to sell it, and indeed, one might
argue they legally shouldn't have because it was collateral from alone,
in the same way that the bank can't immediately foreclose
in your home when you're in it and you've missed
a few payments. They probably weren't meant to do so,
But I continue now. The Winklevosses are claiming that they
should be considered oded. The difference between two hundred and
(38:02):
eighty four million dollars and the amount oede to earns creditors.
Genesis argues, I should say, the bankruptcy trustee of Genesis,
which has no interest in anything to do what Genesis
is doing other than getting money back for the creditors,
most of which are institutional customers, come last. That trustee
is arguing that it actually didn't give Gemini two hundred
(38:24):
and eighty four million dollars in credit. They gave them
thirty million, nine hundred and five thousand, seven hundred and
eighty two shares of GPTC, and that the collateral should
be valued at the price of GBTC today, which would
value the stake that they had given them at eight
hundred million. This is confusing, but what you need to
realize is Gemini earned customers have lost somewhere between eight
(38:45):
hundred million and a billion dollars. Had the Winklevosses not
sold their shares, they would have got a lot more back.
In essence, the Winklevosses rushed to sell these shares for
effectively no reason, potentially flaunting very basic foreclosure rule, and
Genesis argument is that they shouldn't have to make up
the difference for their massive fuck up. Interestingly, Gemini was
(39:07):
also meant to receive another thirty one million shares of
GPTC on November tenth, twenty twenty two, and Genesis just
didn't send it. And guess what the bankruptcy court isn't
going to help with that. Let's be clear, both of
these parties are scum, and in a just society, they'd
rotten the depths of the worst jails under the terms
of genesis reorganization plan. Under bankruptcy, Gemini earn customers those people,
(39:33):
regular people, the people's college funds, the bar mits for funds,
the single mothers who had lost their money. They'd be
considered Class four unsecured creditors getting paid out behind Genesis
institutional creditors, secured creditors and priority claims, which is why
Genesis had to pay one hundred and seventy five million
dollars to fdx's bankruptcy. A single mothers waited to retrieve
(39:54):
their son's college funds. Yet there may be hope that
Gemini Earned customers will be made whole. Mere hours after
the original broadcast of this podcast, the New York State
Department of Financial Services announced that Gemini had committed to
(40:18):
return at least one point one billion dollars to EARNS customers,
though only after the resolution of Genesis Global Capital's bankruptcy.
Assuming that the bankruptcy courts approved the settlement, Gemini Earned
customers can, according to Gemini, expect to receive approximately ninety
seven percent of their assets in kind within two months
of February twenty eight, twenty twenty four, and the rest
(40:39):
about ten months after that. Unlike the proposed FTX settlement,
customers will also receive the actual crypto they committed. In
the case of FTX, they're getting the dollar equivalent on
the day that FTX went bankrupt, which means they're getting
much less than they'd make if they were selling their
crypto today. This means that these customers might actually make
money because on the day that Gemini Earned shut down,
(41:00):
bitcoin was somewhere between eleven and fifteen thousand dollars. This
means that they're actually going to make a profit somehow,
which is pretty good. It's rare to find good news here,
and don't get too excited yet, though all of this
is dependent on the tedious pace of bankruptcy courts that
in this case especially, we've kind of considered Gemini Earns
customers second class citizens. This landmark settlement is being spun
(41:24):
by the Winkelvoss brothers as and I quote a successful
resolution of Gemini Earn that was reached and I quote
again with Genesis and other creditors, one in which these
identical River twins are considered. And I can't believe they're
willing to say this responsible stewards of the crypto ecosystem.
This couldn't be further from the truth. Superintendent Adrian Harris
(41:46):
of New York State's Department of Financial Services said in
a statement that Gemini had failed to conduct due diligence
on an unregulated third party later accused of massive fraud,
harming EARNED customers who were suddenly unable to access their assets.
The nydfs IS investigation revealed and I quote that Gemini
engaged in unsafe and unsound practices that ultimately threatened the
(42:09):
financial health of the company, and they collected hundreds of
millions of dollars in fees from Gemini customers that could
have gone to Gemini, substantially weakening Gemini's financial condition. The
Winklevosses are not responsible stuarts. They're towering con artists that
got core and they were forced to pay up only
because they ran a foul of one of the few
responsible regulators left in America. While I'm hopeful to earn
(42:33):
customer as a main whole, I also fear that the
bankruptcy courts may drag their feet, and even if they don't,
kind of just want more here. The Winklevosses aren't even
the ones paying the fines. Their company is. Gemini will
pay the thirty seven million dollar fine from the NYDFS,
and I think they're going to pay the one point
one billion dollars in cryptocurrency too. What's weird is I
(42:56):
can find no evidence about where that money is coming from.
I'm also worried that Genesis, as they have multiple times,
will kind of stone wall this deal. They want to
get out of this. They recently settled with the SEC
for twenty one million dollars, so they have a reason
to do well with the US government. But I fear
for this. All of this is condentent on bankruptcy. Courts
(43:18):
don't really care regardless of this landmark settlement. It is great,
it's great that the regulator has got the customer's money back,
but my blood is still boiling. Cameron and Tyler Winklevoss
will continue to run Gemini, which is a multi billion
dollar financial services company, despite the fact that it's very
(43:39):
clear that they really didn't do any due diligence, and
that due diligence which they did they completely ignored. They
knew that this was a bad deal. They sent tens
hundreds over a billion dollars to a company that they
knew as early as twenty twenty one was bordering on insolvent.
Yet they're still allowed to walk around as free men
(44:01):
and stewards of the financial industry. It's kind of taken
the piss and even though the New York Attorney General's
sue is still out there, it's not over yet, and
they're still seeking three billion dollars in restitution. They're doing
so from Gemini and digital currency group, the Winklevosses are
still left unscathed. These are craven fraudsters that continued again
(44:22):
and again to operate without oversight or restrain, and now
they're going to profit handsomely off of an industry built
on the back of manipulating and conning people. And despite
how good this settlement is, these guys are still billionaire
boat boys. They're unscathed. They robbed their own company, they
robbed their customers, They laughed in our faces. And at
(44:44):
this time in society, when tens of thousands of people
are being laid off, when people can't get houses, when
the regular person that cannot seek wealth, people that go
out and fuck over customers again and again and again
in broad daylight, lying to us, lying to you and
me in a way that is so craven, nothing happens
(45:05):
to them. Oh god, they got slightly embarrassed. They can't
be kicked out of Gemini. They own the bloody thing.
The crypto industry isn't attacking them, despite the fact that
two of your so called stewards are fucking con artists.
Anyone who's listening to this, who's a big fan of crypto,
who believes that these guys are good people, or indeed
(45:27):
that really there are any good people in this industry.
Should read the New York Attorney General suit. They should
read everything that the Winklevosses did. They should listen to
this podcast again, perhaps, and recount the many ways, the
manifold ways in which these two giant freaks shat all
over their customers, lied to them, lied to regulators, lied
(45:49):
to their own company, and sat there with their thumbs up,
their asses not digging into their own personal piggybanks, making
the dumbest calls again and again, and nothing has happened
to them. I pray Letitia James and then New York
Attorney General's Office finds a way to exile these two
bastards from this goddamn financial services industry. But I'm gonna
(46:13):
be honest, I'm not holding my breath. Thank you for
listening to Better Offline. It's a weekly tech podcast. You
can find it on iheartradios, app or anywhere else you
find podcasts. The editor and composer of the Better Offline
(46:34):
theme song is Matasowski. You can check out more of
his music and audio projects at matasowski dot com. M
A T T O s o w Ski dot com.
If you want to get in touch with me, email
me at easy at better offline dot com, or visit
me at edzitron on Twitter or zitron dot Besky dot
Social on Blue Sky. Check out my newsletter and more
(46:56):
of my work on better offline dot com. Thank you
for listening.
Speaker 1 (47:06):
Better Offline is a production of cool Zone Media. For
more from cool Zone Media, visit our website Coolzonemedia dot com,
or check us out on the iHeartRadio app, Apple Podcasts,
or wherever you get your podcasts.
Host
Ed Zitron
Popular Podcasts
24/7 News: The Latest
Today’s Latest News In 4 Minutes. Updated Hourly.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.