{"id":596517,"date":"2023-01-11T13:49:53","date_gmt":"2023-01-11T19:49:53","guid":{"rendered":"https:\/\/news.sellorbuyhomefast.com\/index.php\/2023\/01\/11\/who-is-barry-silbert-the-former-crypto-billionaire-that-cameron-winklevoss-is-accusing-of-accounting-fraud\/"},"modified":"2023-01-11T13:49:53","modified_gmt":"2023-01-11T19:49:53","slug":"who-is-barry-silbert-the-former-crypto-billionaire-that-cameron-winklevoss-is-accusing-of-accounting-fraud","status":"publish","type":"post","link":"https:\/\/newsycanuse.com\/index.php\/2023\/01\/11\/who-is-barry-silbert-the-former-crypto-billionaire-that-cameron-winklevoss-is-accusing-of-accounting-fraud\/","title":{"rendered":"Who Is Barry Silbert, The Former Crypto Billionaire That Cameron Winklevoss Is Accusing Of Accounting Fraud?"},"content":{"rendered":"
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Barry Silbert, founder and chief executive officer of Digital Currency Group Inc., speaks during the Skybridge Alternatives (SALT) conference in Las Vegas, Nevada, U.S., on Thursday, May 9, 2019. (Joe Buglewicz\/Bloomberg)<\/p>\n

\u00a9 2019 Bloomberg Finance LP<\/small><\/figcaption><\/figure>\n

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Digital Currency Group CEO Barry Silbert has been accused of fraud by his ex-business partner turned rival, Cameron Winklevoss. The stunning allegations follow Forbes\u2019 estimates last month that Silbert\u2019s fortune had evaporated, and as government investigations into Silbert\u2019s companies ramp up.<\/h3>\n
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Barry Silbert, the CEO of troubled crypto empire Digital Currency Group (DCG), defrauded some 340,000 crypto investors using Gemini Earn, according to allegations made by Cameron Winklevoss, CEO of crypto exchange Gemini, in a scathing open letter published<\/a> to Twitter Tuesday morning.<\/p>\n

The allegations come nearly two months after Genesis Global Trading, DCG\u2019s wholly owned lending firm, suspended withdrawals<\/a> for customers in the wake of FTX\u2019s collapse. Gemini had partnered with Genesis for its \u201cGemini Earn\u201d product, which offered<\/a> investors annual interest returns of up to 8%.<\/p>\n

Silbert and his companies \u201cdefrauded\u201d Gemini customers by \u201cconspir[ing] to make false statements and misrepresentations about the solvency and financial health of Genesis,\u201d alleges Winklevoss. \u201cBy lying, they hoped to buy time to dig themselves out of the hole they created.\u201d<\/p>\n

In response, a DCG spokesperson said in an emailed statement to Forbes<\/em>: \u201cThis is another desperate and unconstructive publicity stunt from Cameron Winklevoss to deflect blame from himself and Gemini, who are solely responsible for operating Gemini Earn and marketing the program to its customers. We are preserving all legal remedies in response to these malicious, false, and defamatory attacks. DCG will continue to engage in productive dialogue with Genesis and its creditors with the goal of arriving at a solution that works for all parties.\u201d<\/p>\n

The US Attorney\u2019s Office for the Eastern District of New York is investigating transactions within the DCG empire and the SEC has also opened an investigation, Bloomberg reported<\/a> last week. Silbert and his companies have not been charged with any crime. DCG has \u201cno knowledge of or reason to believe that there is any Eastern District of New York investigation,\u201d a spokesperson said. Last month, Forbes <\/em>wrote down the value of Silbert\u2019s stake in DCG from $3.2 billion to $0<\/a>. \u201cForbes<\/em> estimates the value of DCG\u2019s outstanding liabilities are greater than the fair market value of its assets in the current market environment,\u201d we wrote at the time.<\/p>\n

The last few months have been a stunning fall from grace for Silbert, a longtime crypto evangelist who says he first invested in Bitcoin in 2012. Prior to his involvement in digital assets, Silbert was an investment banker and financial entrepreneur. He graduated from the Goizueta Business School of Emory University in 1998, followed by a six-year stint at investment bank Houlihan Lokey, where he specialized in financial restructurings. There, Silbert worked on some of the most prominent bankruptcies of the Dot-Com collapse, including Enron and WorldCom.<\/p>\n

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In 2004, Silbert founded Restricted Stock Partners, a secondary trading platform for employees of companies with restricted stock in public companies. \u201cIt’s the largest asset class without a developed secondary market,\u201d Silbert told the New York Times<\/em> in a 2005 profile<\/a>. \u201cIt\u2019s not a new or novel concept but the time is right because of the proliferation of hedge funds.\u201d<\/p>\n

Silbert rebranded his company to SecondMarket in 2008 as he expanded the trading platform to include private company stock and alternative investments, after an early Facebook employee approached Silbert\u2019s company to ask if they could help him sell his shares. By 2011, SecondMarket had facilitated billions of dollars in private market transactions and had over 75,000 registered users.<\/p>\n

As SecondMarket grew, so did Silbert\u2019s reputation as a financial entrepreneur. In 2009, he was named one of Ernst & Young’s Entrepreneurs of the Year, and as Crain\u2019s\u2019 <\/em>Entrepreneur of the Year. Michael Bloomberg, then mayor of New York City, invited Silbert to join his Council on Technology and Innovation. Silbert was named to Fortune\u2019s \u201c40 Under 40\u201d list. He provided testimony<\/a> to the U.S. Senate on financial regulations.<\/p>\n

One former SecondMarket employee remembered Silbert as \u201cvery much a by-the-book kind of guy.\u201d Dealing in unregistered securities, Silbert was \u201cfocused on making sure we were in good standing\u201d with regulators.<\/p>\n

A second early former employee, who worked at the company for several years, described SecondMarket as \u201ca master class in the Silicon Valley trait of hyping a company prior to actually building it.\u201d SecondMarket representatives were \u201cpitching it as an online marketplace of illiquid assets,\u201d but the company \u201cnever moved passed a highly manual process requiring humans to executive every aspect,\u201d says the ex-employee.<\/p>\n

As for Silbert\u2019s management style: \u201cBarry as a person was cold and wouldn\u2019t even make eye contact with anyone but the few senior people he interacted with,\u201d the former SecondMarket employee says. \u201cHe delegated morale building to others and rarely spoke to people even when it was 20 people in the office.\u201d<\/p>\n

Nasdaq bought SecondMarket in 2015 for an undisclosed amount. That same year, Silbert launched Digital Currency Group and styled it as an old-school holding company, but built for the Web3 age. DCG founded and acquired assets including news site CoinDesk, bitcoin public trust Grayscale, bitcoin mining company Foundry, and approximately 200 other digital asset investments and tokens.<\/p>\n

\u201cBeing part of DCG has been great in the sense that Silbert lets us think long term, in terms of decades, and is not really worried about month to month, quarter to quarter results,\u201d Mike Colyer, CEO and founder of bitcoin miner Foundry, told<\/a> Forbes <\/em>last month.<\/p>\n

The value of DCG\u2019s portfolio ballooned amid crypto\u2019s bull market run during the pandemic. In November 2021, some Digital Currency Group investors sold around $700 million of their shares at a $10 billion valuation.<\/p>\n

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\u201cWe\u2019re the best proxy for investing in this industry,\u201d Silbert boasted<\/a> to CNBC <\/em>at the time. Silbert also compared himself to 19th century oil tycoon John D. Rockefeller. \u201cThe model I use as an inspiration is Standard Oil,\u201d he told<\/a> the Wall Street Journal, comparing DCG\u2019s crypto portfolio to Rockefeller\u2019s oil conglomerate.<\/p>\n

Grayscale, an investment trust that holds Bitcoin on behalf of investors, quickly became DCG\u2019s most valuable asset, as institutions and high-net-worth investors clamored for a way to gain exposure to Bitcoin. The publicly traded shares of Grayscale\u2019s Bitcoin Trust (GBTC) offered investors access to Bitcoin\u2019s upside\u2013but without having to actually buy and store the digital currency, which many were prohibited from doing. In turn, Grayscale charged a flat 2% fee, higher than other ETFs and closed-end funds, and restricted investors from making immediate redemptions for the underlying asset. At its peak, GBTC\u2019s underlying Bitcoin assets were worth over $43 billion<\/a>. Grayscale offers similarly structured products for other crypto assets, including Ethereum.<\/p>\n

\u201cIn the early days everybody kind of celebrated it,\u201d recalls Mike Belshe, CEO of crypto custodian BitGo. \u201cI think a lot of people were a little bit jealous of Grayscale for having such a lucrative product. It is a bit of a cash cow.\u201d Indeed, Grayscale\u2019s GBTC product generated $471 million of revenue in 2021.<\/p>\n

As Grayscale caught on with investors, a so-called \u201cGBTC premium\u201d emerged, in which the price of GBTC shares were trading for a higher price than the underlying Bitcoin held by Grayscale. That presented an arbitrage opportunity for hedge fund investors, including the ambitious Three Arrows Capital. Genesis, DCG\u2019s lending unit, began lending money to Three Arrows, which it plowed back into GBTC shares, thus continuing to prop up the GBTC premium.<\/p>\n

This trade between Genesis and Three Arrows Capital \u201cballooned the AUM of the Grayscale Bitcoin Trust and, as a consequence, the fees earned by its sponsor, Grayscale Investments,\u201d according to Cameorn Winklevoss, who alleges that Three Arrows Capital, \u201cwas acting as a mere conduit for Genesis, allowing it to enter into what were effectively swap transactions of bitcoin for GBTC shares with the Grayscale Trust.\u201d<\/p>\n

In 2021, the GBTC premium turned into a GBTC discount (wherein GBTC shares began trading for less than the underlying Bitcoin). Yet, Genesis continued to lend to Three Arrows Capital. \u201cThis had the desired effect of keeping GBTC shares from being sold into the market,\u201d Winklevoss notes, \u201cbut for Genesis, this had the undesired effect of keeping its risk position open and allowing it to grow.\u201d<\/p>\n

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Meanwhile, the parent company Digital Currency Group began borrowing money from Genesis, its own lending firm, which it plowed back into GBTC, the publicly traded trust of its own subsidiary Grayscale. DCG bought nearly $800 million worth of GBTC shares after the GBTC premium became a discount.<\/p>\n

\u201cDCG was making a hedge fund-like trade, buying their own product on leverage,\u201d says Ram Ahluwalia, CEO of crypto investment advisor Lumida Wealth.<\/p>\n

When Three Arrows Capital blew up in June 2022, Genesis was left with a roughly $1.2 billion hole on its balance sheet, which it then moved to the books of its parent company, Digital Currency Group, in the form of a promissory note due over 10 years.<\/p>\n

\u201cThey had a solvency issue at Genesis, which they transformed into a liquidity issue,\u201d says Ahluwalia. \u201cBut those losses don’t disappear.\u201d<\/p>\n

For another five months after Three Arrows\u2019 collapse, Gemini, the Winklevoss\u2019 exchange, continued to rely on Genesis for its Earn Program, and users could continue to redeem their crypto. But the blowup of FTX tipped the scales, causing Genesis to pause all redemptions.<\/p>\n

Following FTX\u2019s collapse, Genesis was reportedly seeking a $1 billion cash infusion, but there were no takers as investors ran for the hills. A few days ago, DCG wound down its HQ wealth management business, and Genesis laid off 30%<\/a> of its staff.<\/p>\n

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This story was updated to provide comment from DCG on Bloomberg\u2019s report about a New York investigation. <\/em><\/p>\n<\/div>\n

Read More<\/a>
\n John Hyatt<\/p>\n","protected":false},"excerpt":{"rendered":"

Barry Silbert, founder and chief executive officer of Digital Currency Group Inc., speaks during the Skybridge Alternatives (SALT) conference in Las Vegas, Nevada, U.S., on Thursday, May 9, 2019. (Joe Buglewicz\/Bloomberg)\u00a9 2019 Bloomberg Finance LP Digital Currency Group CEO Barry Silbert has been accused of fraud by his ex-business partner turned rival, Cameron Winklevoss. The<\/p>\n","protected":false},"author":1,"featured_media":596518,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27397,117883],"tags":[],"class_list":{"0":"post-596517","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-barry","8":"category-silbert"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/596517","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/comments?post=596517"}],"version-history":[{"count":0,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/596517\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media\/596518"}],"wp:attachment":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media?parent=596517"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/categories?post=596517"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/tags?post=596517"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}