Cryptocurrency exchange Gemini, co-owned by Tyler and Cameron Winklevoss, has filed a lawsuit against crypto lender Genesis in an attempt to gain control over 60 million shares of the Grayscale Bitcoin Trust (GBTC) worth approximately $1.6 billion. These shares were pledged as collateral for Gemini’s Earn program.
Gemini Aims to Repay Frozen Earn Customers
Gemini argues that obtaining the GBTC shares would enable them to fully repay all Earn customers whose funds have been frozen since Genesis halted withdrawals last year.
Genesis, Gemini, and CoinDesk are All Owned by Digital Currency Group
All three entities involved in the lawsuit – Genesis, Gemini, and CoinDesk – are subsidiaries of Digital Currency Group.
Lawsuit Alleges Harm to Earn Users
The lawsuit claims that Genesis has taken actions that have harmed Earn users and hindered the recovery of their assets.
Follows New York AG Lawsuit
This lawsuit comes just a week after the New York Attorney General sued Gemini, Genesis, and DCG for allegedly defrauding over 230,000 investors out of more than $1 billion.
Disputed SEC Accusations
Both Gemini and Genesis have disputed accusations from the SEC that the Earn program was an unregistered security.
Gemini has filed a lawsuit in bankruptcy court against Genesis, seeking to prevent them from using 60 million GBTC shares as repayment for other creditors. The purpose is to ensure that these shares are exclusively used to reimburse Earn customers who have been unable to access their funds since Genesis suspended the program in November 2022. With a value of around $1.6 billion, obtaining these shares would allow Gemini to fully reimburse the estimated 230,000 Earn users.
Gemini alleges that Genesis has taken actions to hinder and delay the recovery of assets for Earn users. This legal action follows the recent lawsuit by the New York Attorney General against Gemini, Genesis, and DCG for alleged fraud against Earn investors.
Both Gemini and Genesis have denied the SEC’s claims that the Earn program was an unregistered security. However, the freezing of Earn withdrawals by Genesis led to legal action from users seeking to retrieve their funds.
The outcome of this lawsuit will determine how much Earn users can expect to recover from the failed program.
Gemini’s lawsuit against Genesis is a significant move in their efforts to regain control over $1.6 billion worth of GBTC shares. By seeking exclusive rights to these shares, Gemini aims to fully repay the frozen funds of their Earn customers. This legal battle comes at a time when both companies are facing scrutiny and allegations of fraud. The outcome will not only impact the future of Earn users but also shed light on the regulatory environment surrounding crypto exchanges and lending platforms.
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