Tyler and Cameron Winklevoss, the billionaire twins behind crypto exchange Gemini, are facing a series of setbacks as issues surrounding their exchange have reached new heights in recent times.
The crypto company is struggling with a shrinking market share, regulatory issues, a lawsuit by the SEC, a possible breakup with a banking partner, and a crucial due date on a loan.
The loan, if repaid by the lending partner’s parent company, could help recoup some of the $900 million worth of crypto deposits trapped in its defunct Earn product, according to a Bloomberg report.
While trading activity has modestly recovered as of late, the growing regulatory pressure as well as the exchange’s small market share makes it difficult for Gemini to get back on its feet.
“Their small market share and raft of regulatory troubles portend a bleak future for Gemini,” said Eswar Prasad, a professor at Cornell University and author of The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance.
That, and the skepticism of retail investors who lost money during the recent market meltdown, could “make it difficult for an exchange like Gemini to find a suitable niche.”
Last week, the founders were spotted in London following other US crypto executives who have recently gone on charm offensives abroad in part to counter the US crackdown.
There, they met with regulators and talked up a possible second headquarters in the UK.
On Thursday, the twins announced that Dublin would become Gemini’s new European base.
Gemini Launches Derivatives Exchange Outside the US
The firm has recently launched a derivatives exchange, Gemini Foundation, in a number of jurisdictions outside of the US, UK, and European Union. It also announced plans to set up an engineering hub in India.
With personal fortunes of $3.2 billion each, according to Bloomberg calculations, the brothers are capable of self-funding Gemini — as they did in recent months during crypto’s darkest days.
Digital-asset exchanges rely largely on trading fees, so the more volume a trading platform can attract, the better.
Trading on Gemini fell 46% in the first quarter of the year compared to the last quarter of 2022, which was among the steepest declines. It also faces an uphill climb to regain market share.
Some analysts noted that a better outcome might be for a larger competitor to acquire Gemini.
“The Winklevoss twins have a strong brand,” said Campbell Harvey, a finance professor at Duke University. “You can imagine possible mergers” with bigger players like Coinbase or Kraken.
However, Gemini’s legal issues could make it a tougher sell.
For starters, there’s the defunct Earn product, whose customers haven’t been able to withdraw their money since mid-November, when Gemini’s lending partner, Genesis Global Capital, filed for bankruptcy.
Gemini negotiated a tentative settlement on behalf of its Earn users with Genesis Global, as well as Genesis parent Digital Currency Group and other creditors in February, but it has yet to be finalized. Discussions are still ongoing.
In January, the Securities and Exchange Commission sued both Gemini and Genesis for allegedly selling unregistered securities through Earn.
The regulator is seeking remedies including “permanent injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties.”
“One of the remedies they will seek from the court is that every single person gets their money back,” John Reed Stark, former chief of the SEC’s Office of Internet Enforcement, said at the time.
Nevertheless, Gemini’s setbacks raise questions about whether it will ever be able to bounce back or if it will stay stuck in limbo.