Cryptocurrency exchange Gemini, Co-Owned by Tyler & Cameron Winklevoss, has filed a lawsuit against crypto lender Genesis seeking control over $1.6 billion worth of Grayscale Bitcoin Trust (GBTC) shares that were pledged as collateral for Gemini’s Earn program.


Keypoints

  • Gemini has filed a lawsuit against Genesis seeking control of 60 million shares of the Grayscale Bitcoin Trust (GBTC) worth about $1.6 billion. These were pledged as collateral for the Gemini Earn product.
  • Gemini says obtaining the GBTC shares would allow it 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.
  • The lawsuit alleges Genesis has taken actions to harm Earn users and hinder recovery of their assets.
  • It comes a week after the New York AG sued Gemini, Genesis, and DCG for allegedly defrauding over 230,000 investors out of over $1 billion.
  • Both Gemini and Genesis have disputed SEC accusations that Earn was an unregistered security.

The lawsuit, filed in bankruptcy court, aims to prevent Genesis from using the 60 million GBTC shares to repay other creditors. Gemini argues the shares should be used exclusively to make Earn customers whole after Genesis froze withdrawals from the program last year.

Obtaining the shares would allow Gemini to fully reimburse the estimated 230,000 Earn users whose funds have been inaccessible since Genesis halted the program in November 2022. The shares are currently worth approximately $1.6 billion.

Gemini, Genesis, and crypto news site CoinDesk are all subsidiaries of Digital Currency Group (DCG). Gemini claims Genesis has taken actions to “hinder and delay” Earn users from recovering their assets.

The legal action comes just one week after the New York Attorney General sued Gemini, Genesis, and DCG for allegedly defrauding Earn investors out of over $1 billion.

Gemini and Genesis have both rejected accusations from the SEC that the Earn program constituted an unregistered security. However, the collapse of Three Arrows Capital and FTX led to Genesis freezing Earn withdrawals, sparking legal action from users seeking to recover their funds.

The lawsuit aims to establish Gemini’s sole rights to the GBTC collateral so it may sell the shares and reimburse Earn users. Genesis has not yet publicly responded to the lawsuit. The outcome of the legal battle will determine how much Earn users stand to recover from the failed program.

Source: https://blockonomi.com/gemini-v-genesis-the-winklevii-crypto-exchange-sues-over-1-6-billion-in-gbtc-collateral/