Who Are The Winklevoss Twins Behind Gemini?

idea for a social network. Or you might know that Cameron and Tyler Winklevoss set up a crypto exchange called Gemini, which is currently involved in a very ugly and very public dispute with the folks over a Genesis. Both Genesis and Gemini we know so many gennames are facing serious allegations from US regulators about their products and services. Or perhaps you're familiar with their cover band, Mars Junction, Tyler's

the lead singer, Cameron jams on guitar. The twins certainly lead a very interesting life, one enabled by their billions of dollars. That wealth comes in part from their early adoption of digital assets like bitcoin. When they settled out of court with Mark Zuckerberg all those years ago for around sixty five million dollars. They put some of those

assets into crypto. Here to break down what's up with the Winklevoss twins and their presence and digital assets is Bloomberg reporta Olga karif Olga, welcome back to the show. Great to be back. Thank you. Let's talk about some twins, specifically the winkle Voss twins or as many of us like to call them, the winkle v What's going on with them? Why are we talking about them today? So we are talking about them to day because there are about three hundred forty thousand people who are very unhappy

with them. So these are people who used the Brothers Gemini Exchange for their crypto and then they decided to also use the so called earned program that Gemini offered. Basically, the way this program worked was, you know, if you have crypto and you want to earn yield on it, you put it into Earn and your crypto has been being lent out through Genesis, which is a partner of Gemini, and you can earn up to you know, around eight percent yield, which is high, which is like what was

attractive about this product? Yeah, way higher than you could earn at a bank, except of course the bank your deposits are ensured. And as all of the Gemini Earned customers know. Now you know all this, you're whatever you put into earn is not ensured um And of course Gemini has said this upfront, but many people don't read terms of service. Well, okay, so Gemini was offering this interesting product it was it was providing you know, yields

or returns that were unavailable to other folks. How did they get into trouble though? How did they end up with having hundreds of thousands of people being mad at them? So the trouble really started with um Genesis their partner. So over the summer, Genesis basically couldn't collect alone. It gave to another crypto firm that went under called Three Arrows. It was a hedge fund, and you know, essentially genesis

Is financial trouble started right there. And in November, Genesis halted withdrawals and that meant that if you're in their earned program, you cannot withdraw your money. And essentially the Winkless Brothers have been working with Genesis on some sort of a resolution. Now, remember the Winkle Boss brothers have been waging a public fight against Genesis, even calling for Barry Silber, the founder of the digital currency group Empire, to step down as it's CEO. As Genesis is lending.

So we've got this situation, and we've talked about on the show a couple of times, where even if one entity is quote unquote fine, the real risk for a lot of consumers is what's called a counter party, right, It's like who that entity is also doing business with and what kinds of stresses and risks they're exposed to.

A lot of Gemini's arguments, including in the UK, were that they were better than other folks at you know, managing their risk, at making sure that even if they had those exposures, they were at relatively shall we say, not stressful levels. As Genesis is lending business bankruptcy, Gemini has been listed as its largest outside creditor with the most money owed by a landslide. What went wrong And it's a great point that people thought about Gemini differently

than about a lot of other companies. So Ever since the brothers started the exchange in fourteen, they've been all about, you know, following regulation and being super conservative, you know, most other exchanges would list tons of you know, tokens.

Uh in this exchange wouldn't list a ton, just because they wanted to be super conservative and super compliant, and so people kind of thought about them in this way even after Gemini launched turn in early and at the time the brothers said that, you know, essentially they're checking up on their partner, They're checking up genesiss financials from time to time. So people had a lot more faith in in what gem and I was doing with EARN

even as a lot of other yield programs collapsed last year. Now, one of the bits of reporting that you had in the profile that you wrote of you know, the Winklevoss Twins and what they've been dealing with is that they have a cover band. Absolutely it's called Mars Junction and essentially, uh they actually went on tour last summer as a lot of this troubles and Crypto just first started appearing and boiling to the surface. Why are people not about this?

Do they hit music? So? No? I think um, I think it just a lot of people are wondering why they went on tour when things were going south and Crypto, you know, at the time when they went on tour h three arrows the hedge fund that ultimately um led to troubles. That Genesis was collapsing and uh Celsius was in the brink of bankruptcy, and you know, this domino started following and we uh, you know, only months later can see just how interconnected all the different parts of

the crypto ecosystem are. All these companies you know, lent and borrowed from each other and did business with each other, and you know, um, there's hardly anybody in the crypto industry that hasn't been impacted in some way by what happened. Now. I feel like over the past couple of weeks of episodes, I have to talk about the Securities and Exchange Commission like every single time because they're like, Hi, we're here too, So what is the sec of two as it relates

to this Genesis Gemini situation? Why are they also involved? Sure? So, the sec essentially filed a lawsuit against Genesis and gem and I, accusing them of basically running this earned program even though in their opinion, it's equivalent to offering unregistered securities. So you have regulators as part of the mix as well, which I'm sure complicates any sort of settlement and discussions

that are happening. Why over the past several months do you think we have seen so much more of this kind of SEC litigation, because you know, if we go back to let's say two thousand twenty early one, the rhetoric was much different. You know, there was this kind of excitement and enthusiasm because folks were like, oh, Gary Gensler, he taught a blockchain class, like he's down for the cause. And now they're like, Gary Ginsler, why is he coming

for us? Like what what happened to? You know, have this shift of the SEC from like we're keeping an eye on things too, and now we're coming after you. You know, Gary Ginsler is under a lot of pressure

as well. He is facing a lot of criticism because he was pursuing Kim Kardashi and with his enforcement actions while you know, a lot of this bad stuff that is affecting thousands or hundreds of thousands of people has been happening and the SEC has done nothing until sort of everybody was already uh, you know, in bankruptcy if

you will, right, or nearing bankruptcy. And so Gary Ginsler is facing a lot of criticistem off, like where were you and why didn't you go after this guy's earlier while uh, you know, they weren't in such trouble and maybe the users could have gotten some of some more of their money back up next, more from Bloomberg Reports to Olga Karif on what's happening with the Winkle Lost Wins. We'll be right back in the Gloomberg ecosystem, you know,

our colleague. On Bloomberg Opinion, Aaron Brown made the argument that the Winklevoss twins reputation has been severely tarnished. This idea that they were like the literal golden Boys of crypto seems to be fading a little bit. Do you think that the Winklevosses have a tarnished reputation? Quote unquote. So so I'm of two minds here. On the one hand, um Gemini says it worked with regulators, It ran it's earned product by them and they didn't say anything against it.

And of course we know that coin Base tried to launch a similar product and was directly told by regulators that if you launch, it will sue, and so they put it back off the clear. So, on the one hand, you would think that once Gemini saw the coin based action, maybe it should have reconsidered or done something. On the other hand, if they what what they say is true, and they initially got a green light from from their regulators, then they could also feel like, we we haven't done

anything wrong, you know. I think part of what needs to happen is re examination of regulators role and actions and whether they were asleep at the wheel, whether they did all they were supposed to, and overall, I think Gemini still continues to have, you know, a much better reputation than a lot of other overseas exchanges, and the wink of US twins are obviously accomplished and known people who are trying to comply with the US law, as they have repeatedly said, so, you know, but I also

at the same time, um, there are a lot of posts on Reddit and other social networks essentially saying, you know, I used to be a loyal Gemini customer and I've left. I am fed up with this. I lost money on earn not coming back, and in fact, if we look at statistics, Gemini lost quite a bit of market share over the last year. So I think there's definitely been damaged done. You know, at the same time, this is part of a problem that has impacted the entire industry.

The Winkle Vye have had to play this very delicately, these two different things where we're like, we wear polo shirts, but we also shred I mean guitar and you know, it seems like kind of emblematic of what they were trying to do with Gemini, right, like offer these attractive, slightly risky yields but also benefit from the perception that they were one of the safer places to be. How possible is is going to be in the future in

this regulatory environment. I think with regulators really kind of tightening their grip on the sector, like you said, it all goes to this trade off between risk and yield, and I think what we might see is that as regulations tighten, the ability to sort of speculate and earn crazy double or triple digit yields here might decline. I'm not sure it will go away completely, but it might decline. But maybe it's a good thing from the point of send,

point of investor protection and so forth. But in terms of where Gemini and the Winkless Brothers go from here, I think it still remains to be seen. They they both sort of insist that they're not going anywhere. They're very strong believers in the sector. A couple of years ago, Tyler winkle Loss wrote The Big Essays, saying, according to his estimates, he believes that bitcoin will will reach you know, five thousands. We think at attend trillion dollar market cap.

We think one bitcoin well worth five dollars, and we think that could happen inside this decade, definitely the next five years. So we're hardlers at least until they're not just saying that they completely believe that this will be achieved. And I sort of tend to be of the mind that he has. People's memories are short and and if we enter another bullmarket, you know, their business will recover.

And just as a last question on that points about them sticking around, you know, one of the things that you've mentioned is the fact that the brothers have a lot of their own personal wealth right partly from investing in bitcoin. Very very early. Have they made any suggestions too towards saying that they would personally make any of the investors in the urned products whole, or the kind

of separating them as individuals from Geminio's entity. So there has been no suggestion that they would use their personal wealth to bail anybody out. So each brother has about three point two billion and personal wealth at this point. Uh. And I think a lot of investors, even investors in Gemini who you know, the latest round uh Gemini raised was in late they raised four hundred million at valuation

of seven billion for the Gemini exchange. Uh. You know, a lot of investors in Gemini even believe that, you know, if something goes wrong, the brothers will backstop the exchange because they own about seventy of it. But whether they would backstop earn users, I don't think that's clear at all. They haven't said anything like this, and I think it's very unlikely because they're not out right required to bail

anybody out. And while I think there might be some legal arguments saying they have to make their users whole, you know, this would have to go through a legal process most likely before we know whether that's the case or not. Well, as we say, it's never a dull moment. Thank you so much for bring on the show today. It was my pleasure. Thank you. That was Bloomberg reporter

Olga Carife. You can find more of her reporting on the Bloomberg Terminal and on Bloomberg dot com, and be sure to check out our twice weekly newsletter, Bloomberg Crypto. This is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net.

The supervisor producer of Bloomberg Crypto is Vicky Verglina. Our senior producer is Janet Babin. Our producers are Mohammed Farouk and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Desta wonder At is our engineer. Original music by Leo Sidrn. I'm Stacy Marie Shmaal. We'll be back tomorrow