Did Cameron Winklevoss Libel Barry Silbert?

The crypto world is abuzz about the can’t-look-away anger between Cameron Winklevoss and Gemini on one side versus Barry Silbert and Genesis on the other. As fun as it would be to see this cage match as the undercard on a Musk-Zuckerberg UFC dream bout, it will actually unfold in a courtroom in State Supreme Court in Manhattan sometime this fall.

Last Friday, Gemini sued Genesis, claiming that “Defendants DCG and Silbert engaged in a fraudulent scheme to induce a variety of depositors, including Gemini users for whom Gemini acted as custodian and agent, to continue to lend huge amounts of cryptocurrency and U.S. Dollars to DCG’s subsidiary Genesis Global Capital, LLC.”

Basically, the claim boils down to Gemini claiming it was about to terminate its Earn program in October 2022 because of worries about Genesis’ financial strength in the wake of the June ’22 meltdown at Three Arrows Capital, to whom Genesis had lent $2.3 billion. According to the Winklevoss, “Barry reached out to set up a meeting to induce Gemini to continue Earn. He did this knowing Genesis was massively insolvent.”

But as full of invective and emotion as the lawsuit is—and it’s unusually hot for a legal document, with a first sentence that reads “This lawsuit is about fraud” – the real fireworks occurred in a 15-chapter tweetstorm Cameron Winklevoss unfurled on Friday morning. With Silbert personally named as a defendant in the suit alongside Genesis, it makes some strategic sense that Winklevoss would seek to lay as much blame as possible for decay at the executive’s feet.

However, what attracted my attention was just how close to the legal line Winklevoss seems to have come in personally attacking his nemesis.

I’ve been doing business journalism for a long time. At every publication I’ve ever worked, one of the must-attend meetings has always been the libel seminar. That’s where you learn about the conditions that must be met to successfully sue a defendant for libel.

One of those conditions, of course, if that the information be false. The truth is an absolute defense, no matter how damaging or nasty the accusation. But even an. untrue allegation is not libelous, unless it meets certain other conditions.

The accusation must also be damaging. And if the damaged party is a public figure, he must also prove that the untrue, damaging allegation was made maliciously. In other words, if Modern Consensus writes that somebody’s birthday is in August, and it turns out to be in October, they’re not gonna win a libel suit. That’s not damaging information. And even if we call that person, say, a “playboy,” or a “Romeo,” he will have a hard time winning. The subject may find that damaging, but a reasonable juror might not.

However, if Modern Consensus accuses someone of a crime, the defendant doesn’t have to prove that the information is damaging. Crime is prima facie damaging. So if that allegation turns out to be untrue, the plaintiff has a much easier time proving libel. That’s why newspapers run the word “allegedly” with such a religious devotion.

So it caught my eye to see Winklevoss repeatedly accuse Silbert and others at DCG, such as its president, Mark Murphy, of committing “fraud.” Fraud is a crime. If Twitter were a normal publication and Winklevoss a normal journalist, he would have a problem with that until and unless Silbert is convicted in court of having committed the crime of fraud. Elsewhere in the tweets, Winklevoss accuses Silbert of “a lie that hid the gaping hole on Genesis’s balance sheet.” He accuses Barry of disguising the hole by means of “DCG wrote Genesis a sham 10yr promissory note.” More: “A total lie and complete misrepresentation.” “A falsified balance sheet.” “Yet another lie.” “Barry Silbert and other DCG executives were directly involved in these lies and they lied again and again to conceal the truth from Gemini and other creditors.” About Murphy, he writes, “He knew that the reports lied about DCG’s financial support for Genesis. Did he bother to correct them? No.” “And Mark Murphy directly lied.” “The whole promissory note scheme shows that Barry and DCG were in on the fraud.” “DCG — and Barry personally – are direct participants in the fraud that has damaged Gemini and hundreds of thousands of Earn users.”

Now, a publication reporting on the existence of a legal filing is ordinarily given extreme leeway to repeat the suit’s claims, even if they turn out not to be true. But with Winklevoss himself being the plaintiff and Twitter never really treated as an ordinary publication, it’d be interesting to see how these norms are treated.

Modern Consensus asked experienced libel lawyer Robert Garson, the Chairman of GS2Law, about the distinction.

“Ordinarily, the melange of the First Amendment, general deference to the freedom of the press and the secondhand litigation privilege permits a reporter safely to report on allegations in a lawsuit,” Garson told Modern Consensus. “Of course, this is only if the republication reports that the allegations are just that, rather than categorical. Here, though, the litigation privilege may not by sufficiently elastic as to absolve the tweets by Winklevoss.”

In the real world, I don’t expect Silbert to sue Winklevoss for libel. With Winklevoss demanding a minimum of $1.5 billion in a final offer tendered four days before the suit was filed, bad mouthing in the press is the least of either of their worries.

But it’s been interesting to see, in the aftermath of 3AC and FTX meltdowns, just how freely longtime friends and partners have resorted to language that by itself may have gotten them successfully sued just a few months ago.