A "Legitimate" Ponzi Scheme? Unveiling Gemini Exchange's Circular Lending

Author: Protos Staff; Compiled by: Wu Shuo Blockchain

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

**·**One hand funds, the other hand withdraws: Founder-controlled WCF lent crypto assets to Gemini, which then pledged them to a third party to extract USD loans, creating an internal loop lending arrangement.

**·**Low-price capture of control: During the IPO, the founder’s debt was converted into shares with super-voting rights at a 20% discount. Retail investors bought in at a higher price, while the founder maintained control of 94.7% of the voting power.

**·**Sword hanging overhead: Although Deloitte issued an unqualified audit opinion, WCF can withdraw a loan of up to 4,619 BTC at any time, putting exchange liquidity to the test at any moment.

**·**Market-cap avalanche: Since going public, the share price has plunged 88% (down to $4.42), with multiple top-tier investment banks downgrading it to “sell,” and it faces a class-action lawsuit.

**·**Core conclusion: Gemini’s pattern of favoring founder interests and relying on related-party funding has collapsed in the secondary market, and it is now facing a severe governance and trust crisis.

Cameron and Tyler Winklevoss, through their private investment company Winklevoss Capital Fund (WCF), lent thousands of bitcoins ($BTC) and ether ($ETH) to their own crypto exchange, Gemini. After that, Gemini pledged this batch of crypto assets to Galaxy Digital and NYDIG to raise USD loans.

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

The Gemini 10-K filing submitted yesterday disclosed the entire operational structure in detail. Users on social media have described it as a “loop operation.”

Posted on the X platform:

Everything here is a massive circular Ponzi scheme:

Borrow BTC from the related party WCF; pledge these BTC to lenders to obtain USD 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 too (involving Ripple and RLUSD, convertible bonds, etc.)

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

How exactly are these operations legal?

The borrowing loop of Winklevoss Capital Fund

Below is the basic flow of funds. Through an indefinite-term agreement, WCF—owned by the Winklevoss brothers—lends BTC and ETH to Gemini.

Then Gemini 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 this USD funding for day-to-day operations and to meet regulatory capital requirements.

When the IPO was completed on September 15, 2025, the exchange took cash from the $456 million in net IPO proceeds to repay Galaxy’s $116.5 million.

Gemini is currently listed on Nasdaq under ticker GEMI.

The exchange also repaid $238.5 million under Ripple’s warehouse credit facility; however, as of year-end, there was still $154 million in Ripple debt outstanding.

However, this cash repayment did not settle the twins’ own debt.

Gemini converted $200 million of WCF convertible notes, $475 million of WCF term loans, 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 on the same day to buy Class A shares representing the same level of equity interest.

The only difference between Class A and Class B shares lies in the distribution of voting rights and ownership. Aside from that, both have identical par values, dividend rights, and liquidation preference.

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

Retail buyers pay $28, while the Winklevoss brothers only need $22.40

This discount is exactly the core of how the loop operation harms ordinary shareholders.

WCF lends crypto assets to Gemini. Then, Gemini pledges the borrowed assets to obtain even more loans. Specifically, Galaxy and NYDIG lend Gemini the USD funds it needs for day-to-day operations.

Next, during the same IPO, Gemini allocates equity to WCF at the discounted price, but this IPO makes retail investors shoulder a 20% higher entry cost.

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, worth roughly $400 million.

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

In summary, based on Nasdaq’s corporate governance standards, Gemini simultaneously holds the triple identity of debtor, custodian, and a “controlled company.”

Even though it is now a publicly traded company, the co-founders of Gemini still control the vast majority of voting power.

Additionally, according to Arkham Intelligence data cited by crypto researcher Emmett Gallic, WCF holds about 8,757 BTC in the Gemini Custody custody address.

Deloitte issues an unqualified audit opinion

Deloitte (Deloitte) issued an audit report with an unqualified opinion for Gemini. However, the reality is that WCF can request repayment of this $4,619 BTC loan at any time.

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

Gemini’s share price in the secondary market is now down 88% compared with its IPO offering price. “Gemini Space Station” is the name of its legal entity, carrying an implication of rocket launch to the sky, but it’s clearly not living up to that promise right now—the opening price on the first day of the IPO was $37.01 per share.

Now it’s 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, once touching a high of $45.89, and then the stock started a nonstop slide. After setting a new 52-week low of $3.91 on Monday this week, it closed on March 31, 2026 at $4.42 per share, down 88% from the 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 are already class-action lawsuits accusing the company of misleading investors in its strategic planning.