Gemini has filed a lawsuit against crypto lender Genesis for the control of $1.6 billion in Grayscale Bitcoin Trust shares.
Gemini has filed a lawsuit against crypto lender Genesis for the control of $1.6 billion in Grayscale Bitcoin Trust shares.
Crypto exchange Gemini has filed a lawsuit against Genesis Global for 60 million shares of the Grayscale Bitcoin Trust (GBTC) worth an estimated $1.6 billion.
Gemini Sues its Former Business Partner
In a lawsuit filed on October 27 in the US Bankruptcy Court Southern District of New York, Gemini asked a federal judge to rule that Genesis has no right to more than 60 million GBTC shares, which were put up as collateral to users of Gemini’s Earn product. Bloomberg reports the lawsuit seeks to determine who owns the GBTC shares, which are now worth around $1.6 billion. Gemini wants to regain control of the shares to repay the clients of its Earn program.
Gemini and Genesis have been embroiled in a feud since 2022 over the Gemini Earn product. Genesis served as the primary lending partner to the New York-based exchange for this product. Gemini Earn was a high-yield product that promised depositors up to 8% yields.
According to the lawsuit, the shares currently in dispute “would completely secure and satisfy the claims of every single” customer who invested in Earn whose funds have been locked up since Genesis halted withdrawals.
Genesis filed for Chapter 11 bankruptcy in January after it was forced to freeze customer withdrawals after facing unprecedented market downturns and liquidity issues, compounded by the collapse of Sam Bankman-Fried’s FTX crypto exchange.
In the lawsuit, Gemini alleges:
“Genesis has repeatedly taken actions to harm Earn users and to hinder and delay Earn users’ recovery of their digital assets.
It is time to resolve these issues so that Genesis may move forward with a reasonable plan of reorganization and Gemini may distribute the proceeds of the collateral to Earn users.”
In a blog post, Gemini further commented on the matter, saying:
“Genesis is the impediment to making the Earn Users whole. Genesis is seeking to take value away from Earn Users and funnel it to other creditor groups.”
Genesis and Gemini Surrounded by Trouble
The US SEC charged both Gemini and Genesis earlier this year for allegedly selling unregistered securities. The charges relate to the “Earn” product, which the SEC said met its definition of a security by including both an investment contract and a note. SEC Chairman Gary Gensler commented at the time:
“We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors.”
More recently, New York Attorney General Letitia James filed a lawsuit against Gemini, Genesis Global Capital, and its parent company, Digital Currency Group (DCG). Ms James alleges the companies defrauded investors out of over $1 billion. James is seeking restitution for investors and a ban on the firms from operating in New York.
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