Winklevoss Twins in crisis as Gemini Crypto Exchange faces setbacks

Tyler and Cameron Winklevoss, the billionaire twins behind the cryptocurrency exchange Gemini, are facing numerous challenges recently. These issues include a shrinking market share, regulatory problems, a lawsuit by the Securities and Exchange Commission (SEC), a potential separation from a banking partner, and an important loan deadline.

A Bloomberg report suggests that if the loan is repaid by the lending partner’s parent company, it could help recover some of the $900 million worth of cryptocurrency deposits that are trapped in Gemini’s defunct Earn product.

Although trading activity has slightly improved recently, the growing regulatory pressure and the exchange’s small market share make it difficult for Gemini to recover.

According to Eswar Prasad, a professor at Cornell University and author of The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance, “Their small market share and raft of regulatory troubles portend a bleak future for Gemini.” Retail investors who lost money during the recent market meltdown are also skeptical and this could “make it difficult for an exchange like Gemini to find a suitable niche.”

Last week, the founders of Gemini were seen in London following other US cryptocurrency executives who have recently gone on charm offensives abroad to counter the US crackdown. 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 company has recently launched a derivatives exchange, Gemini Foundation, in several jurisdictions outside of the US, UK, and European Union. It has 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 cryptocurrency’s darkest days. Digital-asset exchanges rely largely on trading fees, so the more volume a trading platform can attract, the better. 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. 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.”

Gemini’s setbacks raise questions about whether it will ever be able to bounce back or if it will stay stuck in limbo. Some analysts believe that a better outcome might be for a larger competitor to acquire Gemini. Campbell Harvey, a finance professor at Duke University, said, “The Winklevoss twins have a strong brand. You can imagine possible mergers” with bigger players like blockchain or Kraken.