Crypto lender Genesis Global Capital has taken legal action against cryptocurrency exchange Gemini, aiming to recover $689 million in preferential transfers.
The lawsuit, filed on November 21, alleges that within the 90-day period before Genesis declared bankruptcy in January, Gemini withdrew approximately $689,302,000, prioritizing its own interests over other creditors.
Genesis’s legal team has urged the court to employ remedies outlined in the United States Bankruptcy Code to rectify this perceived unfairness and ensure that Gemini is treated on par with other creditors in a similar position.
The ongoing dispute between these crypto industry heavyweights began after the collapse of the crypto exchange FTX in November 2022.
It escalated into a public feud, with both CEOs accusing each other of noncooperation and issuing threats of legal action.
In a countermove, Gemini filed an adversary proceeding against Genesis on October 27. This proceeding sought to use 62,086,586 shares of the Grayscale Bitcoin Trust as collateral.
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These shares had been pledged by 232,000 Gemini users to secure loans provided by Genesis through the Gemini Earn program.
As of now, the collateral is valued at approximately $1.6 billion.
Genesis had initially filed for bankruptcy in January following the suspension of withdrawals in November 2022.
The fallout from Genesis’s bankruptcy had a detrimental impact on the Gemini Earn program, prompting the crypto exchange to initiate legal action against Genesis’s parent company, Digital Currency Group (DCG), and its CEO, Barry Silbert, for alleged fraud in July.
In another legal move, Genesis itself filed a lawsuit against DCG in September, seeking repayment of multiple loans totaling over $600 million.
This legal battle between Genesis, Gemini, and DCG underscores the complexities and disputes that can arise in the crypto industry, particularly in the realm of lending and asset collateralization.
The outcome of these lawsuits will likely have significant implications for the involved parties and the broader crypto sector as a whole.
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