Gemini sues Genesis for using GBTC shares as collateral to earn, now worth 1.6B
Cryptocurrency exchange Gemini filed an adversary lawsuit against bankrupt crypto lender Genesis Global Holco in the Southern District of New York Bankruptcy Court on October 27. At issue is the fate of 62,086,586 shares of Grayscale Bitcoin Trust (GBTC). By 232,000 Gemini users used it as collateral to secure loans made to Genesis through the Gemini Income program. That guarantee is currently worth nearly $1.6 billion.
According to the suit, Gemini received $284.3 million to secure the mortgage for the benefit of consumers, but Genesis objected and prevented Gemini from distributing the proceeds.
Genesis proposed using the original value of the mortgage, which was more than $800 million, to determine the consumer's deficiency claims, rather than the value of the mortgage. As the value of the collateral exceeds the original value, Genesis frees up hundreds of millions of dollars to distribute to other creditors.
“However, it was Gemini who bore the market risk associated with the original guarantee in order to benefit the users after the foreclosure; therefore, only the users are entitled to any profit as a result of Gemini taking that risk.”
In addition, Genesis' parent company, Digital Currency Group (DCG), transferred additional collateral to Genesis “for immediate distribution to Gemini solely for the benefit of users,” but Genesis proposed to use it, the lawsuit said. Warranty for other purposes. Gemini argued:
“A decision that enforces the terms of the security agreement, affirms Gemini's rightful lien on the original lien, and recognizes users' rights to additional liens will facilitate the recovery of more than $1 billion in digital assets that Genesis wrongly withheld. Meet users for almost a year.
Gemini Earn users comprise 99% of Genesis lenders and their claims represent 28% of all claims by value.
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Genesis filed for bankruptcy in January. In the year It suspended withdrawals in November 2022, affecting the Gemini Earnings program. In July, Gemini sued DCG and its CEO, Barry Silbert, for fraud related to the revenue program.
Today, Gemini filed an adversary lawsuit against Genesis in bankruptcy court seeking $1.6 billion in consumer benefits. For the past 12 months, Genesis has been trying to bring this value from consumers to other lenders. At this price,…
— GeminiTrustCo (@GeminiTrustCo) October 27, 2023
The former partners are defendants in a lawsuit filed by the United States Securities and Exchange Commission alleging that Gemini Air offered unregistered securities. New York Attorney General Leticia James sued Gemini, Genesee and DCG for defrauding EARN program beneficiaries, which include 29,000 New Yorkers. James said he knew Gemini Genesis was in dire financial straits.
Genesis Global Holco did not respond to Cointelegraph's inquiries by press time. Grayscale DCG
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