In a new twist to the ongoing saga between crypto lenders and exchanges, Genesis Global Capital, which filed for bankruptcy in January, has launched a lawsuit against the cryptocurrency exchange Gemini. The legal action seeks to recover a substantial sum of $689 million in preferential transfers, according to court documents filed on November 21.

Legal Showdown Between Genesis and Gemini

The origin of this legal dispute can be traced back to the collapse of the FTX crypto exchange in November 2022. Following the exchange's downfall, the two crypto giants, Genesis and Gemini, found themselves entangled in a public feud over the recovery of funds, leading to the escalation of conflicts into full-fledged lawsuits.

Genesis alleges that during the critical 90-day period preceding its bankruptcy filing, Gemini withdrew an "aggregate gross amount of no less than approximately $689,302,000." The lawsuit contends that this withdrawal occurred at the expense of other creditors, and Gemini continues to benefit by retaining property that Genesis is now attempting to recover. In response, Genesis's legal team has called upon the court to utilize remedies provided by the United States Bankruptcy Code to rectify the perceived unfairness and restore parity among all creditors.

Beyond the courtroom battles, the CEOs of both companies engaged in public disputes, accusing each other of non-cooperation and even issuing threats of legal action. The tension reached a new level when Gemini filed an adversary proceeding against Genesis on October 27. The filing aimed to leverage 62,086,586 shares of its Grayscale Bitcoin Trust, which had been used as collateral to secure loans extended to Genesis through the Gemini Earn program. At present, the collateral is estimated to be valued at approximately $1.6 billion.

🚨BREAKING: #Genesis sues #Gemini to recover “preferential transfers” worth $689m

— Satoshi Club (@esatoshiclub) November 22, 2023

Winklevoss Twins Face Allegations of $282 Million Secret Withdrawal

Finance Magnates reported earlier that Cameron and Tyler Winklevoss, the Co-Founders of Gemini, were facing scrutiny following reports of an alleged hidden withdrawal of $282 million from the now-bankrupt crypto lender, Genesis. The withdrawal reportedly occurred just months before Genesis collapsed entirely, adding another layer of complexity to the ongoing legal battles within the cryptocurrency industry.

Gemini has recently experienced a series of setbacks, including layoffs and a decline in trading volumes. The situation escalated when over $900 million in Gemini customer deposits were frozen due to the collapse of Genesis, which facilitated Gemini Earn, an interest-bearing program.

The withdrawal of funds by the Winklevoss twins has raised questions about whether the funds were corporate assets or part of their personal crypto holdings. Internal documents indicate that the substantial withdrawal included various cryptocurrencies, such as Bitcoin, Ethereum, Gemini's stablecoin, Dogecoin, and more. The timing of this withdrawal, just months before Genesis suspended customer withdrawals, raises suspicions about whether the Winklevoss twins were aware of the impending collapse.

The Winklevoss twins had previously sued DCG, the parent company of Genesis, and its CEO, Barry Silbert, alleging that they were provided with misleading information about Genesis's financial health. The bankruptcy filing by Genesis in January had a ripple effect on the Gemini Earn program. The lawsuit claimed that DCG offered a promissory note instead of the promised financial backing. Despite their attempts to exit the Gemini Earn partnership, the Winklevoss twins asserted that Silbert convinced them otherwise during a face-to-face meeting.