In a legal battle that has been simmering since last year, the cryptocurrency exchange Gemini has taken its dispute with digital asset lender Genesis to court over the rightful ownership of $1.6 billion in Grayscale Bitcoin Trust (GBTC) shares.
Gemini's lawsuit, filed in the US Bankruptcy Court Southern District of New York, seeks to regain control of these shares to fulfill its obligations to clients of its Earn program.
Genesis's Financial Turmoil: Bankruptcy and Operations Cessation
The genesis of this dispute lies in Genesis's previous role as the primary lending partner for Gemini's Earn product, which allowed customers to earn returns on their cryptocurrency holdings.
However, last year's upheaval in the cryptocurrency industry, marked by the collapse of mega-exchange FTX and its reverberations throughout the market, led to Genesis suspending withdrawals. This left Gemini Earn customers in limbo, unsure of the fate of their investments.
Gemini is now striving to recover the $1.6 billion in GBTC shares, a sum that could potentially secure and satisfy the claims of every Earn User who suffered losses. In a recent court filing, Gemini stated: "Today, the Collateral is worth nearly $1.6 billion, an amount that would completely secure and satisfy the claims of every single Earn User." The crux of the issue lies in Genesis's involvement, as Gemini claims that Genesis is obstructing the return of funds to Earn Users and attempting to divert these assets to other creditor groups.
Genesis Global is a subsidiary of Digital Currency Group (DCG). DCG also controls the Grayscale Bitcoin Trust. In January, Genesis Global filed for bankruptcy, and just last month, it announced the cessation of all its operations.
Gemini Trust was founded by the Winklevoss twins, Cameron and Tyler Winklevoss. Cameron Winklevoss has alleged that DCG's CEO, Barry Silbert, is employing "bad faith stall tactics" to delay a resolution to the dispute, further escalating the tension between the parties.
Winklevoss Twins under Scrutiny for $282 Million Withdrawal from Genesis
In an earlier report, Finance Magnates stated that Cameron and Tyler Winklevos were facing scrutiny for an alleged secret withdrawal of $282 million from the now-bankrupt crypto lender Genesis, just months before the firm's collapse.
The withdrawal raised questions about whether the funds were corporate assets or personal holdings of the Winklevoss twins. Gemini maintains that the withdrawn sum belonged to Earn program users and was not corporate or personal funds.
This comes in the midst of other challenges for Gemini, including layoffs and plummeting trading volumes, as well as over $900 million in customer deposits frozen due to Genesis's collapse. A legal dispute between Gemini and Genesis further complicates the situation, with allegations of fraudulent activity. Genesis has been grappling with financial troubles since its bankruptcy and a settlement with FTX.
