Gemini Files Lawsuit Against Genesis Global Holdco Over Collateral Dispute
Cryptocurrency exchange Gemini has taken legal action against bankrupt crypto lender Genesis Global Holdco in the Southern District of New York Bankruptcy Court. The dispute revolves around 62,086,586 shares of Grayscale Bitcoin Trust (GBTC), which were used as collateral to secure loans made by 232,000 Gemini users to Genesis through the Gemini Earn Program. The current value of this collateral is approximately $1.6 billion.
Disputed Action Hinders Distribution of Proceeds
Gemini has received $284.3 million from foreclosing on the collateral for the benefit of Earn users. However, Genesis has disputed this action, preventing Gemini from distributing the proceeds accordingly. Genesis has proposed using the initial value of the collateral, which was over $800 million, to determine the deficiency claim of Earn Users rather than the foreclosure value. This would release hundreds of millions of dollars for distribution to other creditors.
Allegations Against Genesis’ Parent Company
In addition, Gemini alleges that Digital Currency Group (DCG), the parent company of Genesis, transferred additional collateral to Genesis with the intention of distributing it to Gemini for the benefit of Earn Users. However, Genesis intends to use this collateral for other purposes. Gemini argues that a determination in accordance with the Security Agreement and recognizing Earn Users’ rights would enable the return of more than $1 billion in digital assets wrongfully withheld by Genesis for almost a year.
Gemini Earn Users Make Up Majority of Creditors
Gemini Earn users make up 99% of Genesis creditors and their claims represent 28% of all claims by value, according to the lawsuit.
Hot Take: Gemini Takes Legal Action to Protect Earn Users’ Interests
Gemini has filed a lawsuit against Genesis Global Holdco to safeguard the interests of its Earn users. The dispute centers around the collateral used to secure loans made through the Gemini Earn Program. Despite foreclosing on the collateral and receiving $284.3 million, Gemini has been unable to distribute the proceeds due to Genesis’ objections. Gemini argues that Genesis should recognize the rights of Earn Users and return over $1 billion in digital assets. This legal action highlights the importance of ensuring the protection and fair treatment of crypto investors in cases of bankruptcy and collateral disputes.
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