Gemini, a crypto exchange, has launched legal proceedings against digital asset lending firm Genesis, seeking to reclaim Grayscale Bitcoin Trust shares valued at $1.6 billion.
This legal action, initiated last Friday in the U.S. Bankruptcy Court Southern District of New York, is an endeavor to retrieve the shares to reimburse patrons of Gemini’s Earn scheme.
The contention between Gemini and Genesis traces back to the previous year when Genesis acted as a chief lending ally for the Gemini Earn initiative.
Gemini’s Earn initiative offered users an avenue to garner returns on their digital asset holdings. Yet, in the wake of the substantial downfall of the prominent crypto exchange FTX and the ensuing sector-wide disarray, Genesis froze withdrawals. This move left Earn participants in a state of ambiguity concerning their investments.
Through this legal route, Gemini’s objective is to secure the funds to meet its commitments to its user base.
The legal action underscores that the collateral, now valued close to $1.6 billion, would sufficiently cover the claims of all participants in the Earn program.
Gemini points to Genesis as the central obstacle in this restitution process.
Elaborating on the matter through a blog post, Gemini accused Genesis of hindering efforts to repay Earn customers and trying to redirect the funds towards other creditor factions.
It’s pertinent to note that Genesis operates under the Digital Currency Group (DCG) conglomerate, which also oversees the Grayscale Bitcoin Trust, recognized as the world’s premier Bitcoin fund.
The lawsuit claims, “Genesis has consistently acted in ways detrimental to Earn users, obstructing and protracting the process for Earn participants to retrieve their digital assets.”
“The time has come to address and settle these matters so that Genesis can chart a viable plan for restructuring, and Gemini can channel the collateral’s proceeds to the Earn program’s participants.”
Genesis Global, a branch of DCG, declared bankruptcy in January and subsequently confirmed the termination of its entire operations.
In the previous month, the office of the New York Attorney General initiated legal proceedings against DCG, Genesis Global Capital, and Gemini Trust. The suit alleges that these entities duped customers of approximately $1.1 billion.
Gemini Trust, conceived by the renowned crypto luminaries Cameron and Tyler Winklevoss, has levelled accusations against DCG’s chief, Barry Silbert. They allege Silbert of deploying “disingenuous delay strategies” to protract reaching a consensus in the persisting conflict.