In a recent development, Genesis Global Capital, a prominent cryptocurrency lender, has ignited a fierce legal tussle against its former partner, Gemini Trust, aiming to recover a staggering sum surpassing $689 million. The dispute has unveiled a contentious affair within the cryptocurrency sector, marked by intricate legal intricacies and substantial obstacles.
Court documents recently filed by Genesis revealed assertions against Gemini for conducting preferential transfers totaling approximately $689,302,000. According to Genesis, these alleged transfers disadvantaged other creditors, sparking a heated legal clash.
The Genesis-Gemini rift surfaced in the public domain following the collapse of FTX. Genesis filed for bankruptcy in January, a move that propelled its parent company, Digital Currency Group (DCG), into the legal spotlight after Gemini sued DCG in July. The allegations made by Gemini were labeled as “defamatory” and a mere “publicity stunt” by DCG.
In subsequent months, the legal drama intensified. Genesis took legal action against its parent company, DCG, pursuing repayment of multiple loans exceeding $600 million. In a parallel move, Gemini, founded by renowned Winklevoss twins, Tyler and Cameron, sued Genesis in October, focusing on 60 million shares of the Grayscale Bitcoin Trust (GBTC), valued at an estimated $1.6 billion.
The intricate narrative took a turn involving American regulatory bodies. Shortly before Genesis entered bankruptcy, the SEC accused Genesis and Gemini of vending unregistered securities. Additionally, New York Attorney General Letitia James launched a lawsuit against DCG, Genesis, and Gemini, alleging fraudulent activities that impacted upwards of 230,000 investors, with at least 29,000 from New York, resulting in losses exceeding $1 billion.
According to the legal filing, as the market turmoil caused by the collapse of Terraform Labs and digital asset hedge fund Three Arrows Capital unfolded, Gemini initiated “unprecedented withdrawals.” These actions led to a “run on the bank” before the bankruptcy filing, as stated by Genesis. For 90 days, known as the preference period, Gemini demanded repayment of previous loans from Genesis. These transfers were deemed “avoidable” because Genesis was considered insolvent.
