Genesis Global Capital, the crypto lender facing bankruptcy, has initiated legal proceedings against cryptocurrency exchange Gemini in a bid to reclaim $689 million in preferential transfers.
As per a court filing on 21 November, Genesis alleges that within the 90-day period before declaring bankruptcy in January, Gemini withdrew around $689,302,000, disadvantaging other creditors.
The lawsuit contends that Gemini continues to benefit by retaining assets Genesis is attempting to recover.
Genesis’s legal team urges the court to utilise remedies outlined in the United States Bankruptcy Code to rectify the perceived unfairness and equalise Gemini’s position with other creditors.
Background of the Dispute
This legal dispute can be linked to the aftermath of the FTX crypto exchange collapse, where both Genesis and Gemini found themselves embroiled in legal battles over fund recovery.
In July, Gemini filed a lawsuit against Digital Currency Group (DCG), the parent company of Genesis, dismissing the allegations as “defamatory”.
In September, Genesis retaliated by suing DCG to reclaim loans exceeding $600 million.
These loans were collateralised by 60 million shares of the Grayscale Bitcoin Trust (GBTC).
Responding to Genesis’s lawsuit, Gemini took further action on 27 October by initiating an adversary proceeding.
This move aimed to utilise 62,086,586 shares of its Grayscale Bitcoin Trust as collateral.
Originally securing loans through the Gemini Earn program, these shares involved 232,000 users providing loans to Genesis.
The current assessed value of this collateral stands at approximately $1.6 billion.
Genesis faced financial turmoil and filed for bankruptcy in January, a consequential decision following the suspension of withdrawals in November 2022.
This event not only marked a downturn for Genesis but also had ripple effects on the Gemini Earn program.
The fallout prompted legal action from Gemini against Genesis’s parent company, Digital Currency Group (DCG), and its CEO Barry Silbert.
In July, Gemini launched a lawsuit accusing them of fraud.
The subsequent legal battles have continued to unfold, revealing the interplay of forces within the crypto landscape.