Genesis-Gemini battle escalates over $689 million withdrawals

abdelaziz Fathi

Bankrupt crypto lender Genesis Global Capital has filed a lawsuit against Gemini Trust Company and participants in the Gemini Earn Program, seeking to reclaim what it describes as preferential transfers totaling about $689 million.

This legal action follows the termination of an agreement that allowed users to lend digital assets to Genesis via Gemini’s platform.

In the court documents filed, Genesis, a subsidiary of Digital Currency Group, alleges that Gemini made massive withdrawals from Genesis during a critical 90-day preference period before Genesis’s bankruptcy proceedings began in January. These withdrawals are deemed “avoidable transfers” in the filing, which Genesis claims were made to the detriment of other creditors.

The lawsuit is asking the court to apply remedies provided by the United States Bankruptcy Code to rectify the situation. The goal is to return the defendants to the same position as other creditors of Genesis who did not benefit from these preferential transfers.

The legal battle between the two crypto companies has intensified following the collapse of FTX in November 2022, leading to a public feud involving the CEOs of both firms. The contention centers on the recovery of funds, with accusations flying back and forth over non-cooperation and threats of legal action.

Previously, Gemini had taken legal action against Genesis to access shares of the Grayscale Bitcoin Trust used as collateral to secure loans to Genesis through the Gemini Earn program. These shares are currently valued at roughly $1.6 billion.

The lawsuit, filed as part of Genesis’ bankruptcy proceedings, seeks to establish its claim over the GBTC shares that were pledged as collateral. The exchange argues that acquiring control of these shares would fully secure and satisfy the claims of all its Earn customers, who faced frozen funds when Genesis halted withdrawals last year.

Genesis’s bankruptcy has had a terrible impact on the Gemini Earn program and has spawned a series of lawsuits, including one by Gemini against Digital Currency Group and its CEO Barry Silbert, alleging fraud. Conversely, Genesis has also sued DCG seeking repayment of loans exceeding $600 million.

Amidst this ongoing dispute, U.S. regulatory bodies have also stepped in. The SEC has previously alleged that Genesis and Gemini were selling unregistered securities, and the New York Attorney General filed a lawsuit accusing DCG, Genesis, and Gemini of defrauding investors.

The court filing suggests that the market disturbances caused by events like the collapse of Terraform Labs and Three Arrows Capital led to Gemini making withdrawals from Genesis, contributing to a “run on the bank” scenario. These actions are now under scrutiny as potentially preferential and avoidable, considering Genesis’s financial state at the time.

  • Read this next

    Retail FX

    Weekly Roundup: FX prop firms switch to cTrader, who moved $1.35B BTC?

    The foreign exchange and cryptocurrency markets are always active, and this past week was no exception. Stay ahead with a selection of essential stories and updates that matter most to market participants.

    Digital Assets

    Bitcoin breaks all records with a massive $1.347 billion transaction

    This transaction has surpassed previous records, setting a new benchmark for Bitcoin trades. Before this event, the largest Bitcoin transactions included a $1.1 billion trade in April 2020 involving 161,500 BTC, and other significant transactions ranging from $491 million to $1.033 billion throughout 2019 and 2020.

    Digital Assets

    Uniswap debuts Ethereum ‘uni.eth’ subdomains

    Decentralized exchange platform Uniswap has integrated Ethereum Name Service (ENS), allowing users to create human-readable domain names and cryptocurrency wallet addresses using .eth endings.

    Web3

    Magic Square Expands with TruePNL Acquisition

    Binance’s web3 app store, Magic Square, acquired token platform TruePNL in a cash deal this week for an undisclosed sum. The deal brings TruePNL’s infrastructure (excluding branding & token) under Magic Square’s wing. Initially seeking a partnership, Magic Square opted for a full acquisition.

    Crypto Insider

    The Future of Prediction Markets? Zeitgeist Launches Decentralized Court System

    Polkadot-powered prediction market protocol Zeitgeist has announced the launch of its latest innovation: a decentralized court system.

    Digital Assets

    Crypto exchange Kraken fires back at SEC lawsuit, claiming overreach

    Crypto exchange Kraken is pushing back against the U.S. Securities and Exchange Commission (SEC), seeking to toss out a lawsuit that accused the platform of operating without proper registration.

    Industry News

    Exness Named a Best Place to Work in 2024

     Global leader Exness, tops in retail trading volume, earns 2024 “Best Place to Work” award, cementing its employee-centric culture after three prior years of winning the Cyprus national title.

    Digital Assets

    Swan Bitcoin taps Bakkt for crypto offering in the US

    “We are thrilled to be taking this exciting step forward in our partnership with Swan. This is just the beginning of our collaboration, as we intend to explore further growth opportunities together in the future, including expansion into international markets.”

    Digital Assets

    Polkadot Awards Bifrost a 500,000 DOT Loan to Enhance Liquid Staking Adoption

    Bifrost, a leader in liquid staking solutions, has secured a 500,000 DOT loan from Polkadot’s treasury to expand the reach and utility of its vDOT product within the ecosystem.

    <