A "Legitimate" Ponzi Scheme? Uncovering the Circular Lending of Gemini Exchange and Its Founders

Author | Protos Staff

Compiled by | Wu Says Blockchain

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TL;DR: Key takeaways from Gemini’s 10-K report and the internal circular lending scheme

· Money in one hand, money out the other: WCF, owned by the founders, lent crypto assets to Gemini. Gemini then pledged them to a third party to extract U.S. dollar loans, forming an internal circular lending loop.

· Low-price capture of control: During the IPO, the founders’ debt was converted into Class B shares with super voting rights at a 20% discount. Retail investors bought in at inflated prices, while the founders retained direct control over 94.7% of the voting power.

· Sword hanging overhead: Although Deloitte issued an unqualified audit report, WCF can at any time withdraw borrowings of up to 4,619 BTC. The exchange’s liquidity is always at risk.

· Market cap crash: Since going public, the share price has plunged 88% (down to $4.42), has been downgraded to “sell” by multiple top investment banks, and faces a class-action lawsuit.

· Key conclusion: Gemini’s business model appears to favor the founders’ interests and relies on operations funded by related parties. That model has already collapsed in the secondary market, and the company now faces a serious governance and trust crisis.

Cameron and Tyler Winklevoss, through their private investment firm Winklevoss Capital Fund (WCF), lent thousands of Bitcoins ($BTC) and Ethereum ($ETH) to their own crypto exchange, Gemini. Subsequently, Gemini pledged these crypto assets to Galaxy Digital and NYDIG to raise U.S. dollar loans.

In September 2025, the exchange went public at $28 per share and converted $695.6 million in WCF debt into Class B shares with super voting rights at a 20% discount, giving the twin brothers direct control of 94.7% of Gemini’s voting power.

The Gemini 10-K filing submitted yesterday disclosed the complete operating structure in detail. Users on social media have called it a “circular operation.”

Posted on the X platform:

Everything here is a circular Ponzi scheme:

Borrow BTC from the related party WCF; pledge these BTC to lenders to obtain U.S. dollar loans (involving Galaxy, bond issuance, NYDIG).

Some of the loans were settled in the form of discounted shares during the IPO.

Not only that—there are more operations (involving Ripple and RLUSD, convertible bonds, etc. . . .)

Deloitte issued an audit report with no reservations: no Key Audit Matters (KAM), and it said nothing about issues such as related parties, liquidity, and going-concern capability . . .

How exactly are these operations legal?

The WCF lending loop

Below is the basic flow of funds. The WCF, controlled by the Winklevoss brothers, lends BTC and ETH to Gemini under an agreement with no fixed term.

Gemini then provides the borrowed crypto assets as collateral to third-party lending institutions. Galaxy Digital provides a $116.5 million loan at an interest rate of 11–12%, with a collateral ratio of 145–155%. NYDIG provides $75 million via a repurchase agreement at an interest rate of 8.5%.

Gemini uses the USD proceeds for day-to-day operations and to meet regulatory capital requirements.

When the IPO was completed on September 15, 2025, the exchange took cash out of the $456 million net IPO proceeds to repay Galaxy the $116.5 million it owed.

Gemini is currently listed and traded on Nasdaq under the ticker GEMI.

The exchange also repaid $238.5 million under Ripple’s warehouse credit facility, but as of year-end there remained $154 million in Ripple debt outstanding that had not been settled.

However, the twins’ own debt was not repaid with cash.

Gemini converted the $200 million WCF convertible notes, the $475 million WCF term loan, and accrued interest into 31.1 million shares of Class B stock with super voting rights at a price of $22.40 per share.

This conversion price is 20% lower than what retail investors paid the same day to buy Class A shares representing equivalent equity.

The only difference between Class A and Class B shares is the distribution of voting rights versus ownership. Otherwise, their par value, dividend rights, and liquidation priority are completely identical.

Class B shares can be converted into Class A shares on a one-to-one basis.

Retail buy-in price is $28, while the Winklevoss brothers only need $22.40

This discount is precisely the core of how this circular operation harms the interests of ordinary shareholders.

WCF lends crypto assets to Gemini. Then Gemini pledges the borrowed assets to obtain more loans. Specifically, Galaxy and NYDIG lend Gemini U.S. dollar funding for its day-to-day operations.

Next, during the same IPO, Gemini issues equity to WCF at a discounted price, and this IPO forces retail investors to bear an entry cost 20% higher.

Further reading: Sources say the Winklevoss brothers withdrew $280 million before Genesis collapsed

The SEC 10-K filing confirms that as of December 31, 2025, Gemini still owes WCF 4,619 BTC, and the remaining balance is worth approximately $400 million.

In 2025, Gemini paid $24.2 million in borrowing fees to WCF.

In sum, according to Nasdaq’s corporate governance standards, Gemini simultaneously holds three identities: debtor, custodian, and a “controlled company.”

Even though it is already a publicly traded company, Gemini’s co-founders still hold the vast majority of voting rights.

In addition, citing Arkham Intelligence data referenced by crypto researcher Emmett Gallic, WCF holds roughly 8,757 BTC in Gemini Custody’s custody addresses.

Deloitte issues an audit opinion with no reservations

Deloitte (the firm also known as “Deloitte,” i.e., 德勤) provided Gemini with an audit report with no reservations. However, the reality is that WCF can require repayment of this loan of up to 4,619 BTC at any time.

For the twins, a mere written notice is enough to shake the foundation of the exchange they effectively control.

Gemini’s share price in the secondary market has already crashed 88% from its IPO offering price. “Gemini Space Station” is the name of its legal entity, carrying the imagery of a rocket taking off—but at present, it is clearly not living up to the name. Its opening price on the first day of the IPO was $37.01 per share.

Now it is down to just $4.42 per share.

Gemini set its IPO offering price at $28 on September 11, 2025. The next day it opened at $37.01, briefly hit a high of $45.89, and then began a relentless downtrend. After the stock set a new 52-week low of $3.91 on Monday of this week, it closed at $4.42 on March 31, 2026, down 88% versus its IPO opening price.

The company’s market capitalization has crashed from above $3.8 billion to about $520 million. Citigroup, Cantor, Truist, and Evercore have all downgraded the stock to “sell.”

There is now already a class-action lawsuit accusing the company of misleading investors in its strategic planning.