In a recent turn of events, crypto lender Genesis Global Capital has filed a lawsuit against cryptocurrency exchange Gemini Trust, its former business partner, aiming to recover over $689 million. The court filing, made public late on Tuesday, alleges that Gemini executed preferential transfers totaling approximately $689,302,000 from Genesis, prioritizing its own interests over other creditors. Genesis is now urging the court to rectify this perceived injustice.
The Genesis-Gemini saga began with the collapse of FTX, which led to Genesis filing for bankruptcy in January. This legal battle has since escalated, involving various entities and bringing the parent company, Digital Currency Group (DCG), into the fray. In July, Gemini sued DCG, describing the allegations as “defamatory” and a “publicity stunt.” Subsequently, in September, Genesis retaliated by suing DCG, seeking the repayment of multiple loans exceeding $600 million.
The dispute took another twist in October when Gemini, led by co-founders Tyler and Cameron Winklevoss, sued Genesis over 60 million shares of the Grayscale Bitcoin Trust (GBTC), with an estimated value of around $1.6 billion.
The legal wrangling has not been confined to private entities, as U.S. authorities have also entered the fray. In January, just days before Genesis filed for bankruptcy, the U.S. Securities and Exchange Commission (SEC) alleged that both Genesis and Gemini sold unregistered securities. Adding to the complexity, last month, New York Attorney General Letitia James filed a lawsuit against DCG, Genesis, and Gemini, accusing them of defrauding over 230,000 investors, including at least 29,000 New Yorkers, of more than $1 billion.
The recent court filing by Genesis contends that Gemini’s actions during the market turmoil caused by the collapse of LUNA and TerraUSD, along with the troubles faced by digital asset hedge fund Three Arrows Capital, exacerbated the situation. Gemini allegedly made “unprecedented withdrawals” leading up to the bankruptcy filing, contributing to a “run on the bank.”
During the ninety-day preference period, Gemini demanded repayment of prior loans made to Genesis, claiming they were “avoidable” due to Genesis being, according to “information and belief,” insolvent at the time.
As the legal battle unfolds, the cryptocurrency industry watches closely, aware that the outcome could set significant precedents for future disputes within the rapidly evolving digital asset landscape.