Cryptocurrency brokerage Genesis Global Capital has sued crypto exchange Gemini Trust to recover over $689million in preferential transfers, as per a Tuesday court filing.
The two entities, who were former business partners, have been embroiled in legal feuds over the recovery of funds since the fall of the infamous crypto exchange FTX in November 2022.
In the latest suit, Genesis alleged that during the 90-day period before it filed for bankruptcy in January, Gemini withdrew an “aggregate gross amount of no less than approximately $689,302,000”. This was at the expense of other creditors and continues to benefit through retaining the property Genesis seeks to recover.
The friction between the two companies started soon after Genesis filed for bankruptcy in January this year. This adversely affected the Gemini Earn program, following which Genesis’ parent company, Digital Currency Group (DCG), was sued by Gemini for fraud in July. These allegations were tagged as “defamatory” and a “publicity stunt” by the DCG back then.
Recently, Genesis hit back at the DCG with a lawsuit seeking the repayment of multiple loans worth over $600m. This was followed by another one, where Gemini sued Genesis over 60 million shares of the Grayscale Bitcoin Trust (GBTC), valued at around $1.6billion.
Genesis, which is the plaintiff this time in the latest suit, has asked the court to use the remedies provided by the United States Bankruptcy Code to correct the “unfairness and return Defendants to the same position as Plaintiff’s other similarly-situated creditors”.
In its preliminary statement, it talked about the multi-million dollar worth withdrawals saying: “As a result of these withdrawals, Defendants benefitted at the expense of Plaintiff’s other creditors, and continue to benefit to this day through their retention of the property Plaintiff seeks to avoid and recover here. Thus, Plaintiff hereby seeks to make use of the remedies provided by the Bankruptcy Code in order to correct this unfairness and return Defendants to the same position as Plaintiff’s other similarly-situated creditors.”
Both the companies also face the wrath of the US Securities and Exchange Commission (SEC) which has accused them of selling unregistered securities. On top of this, New York Attorney General, Letitia James, also filed a lawsuit against DCG, Genesis and Gemini for allegedly defrauding more than 230,000 investors of more than $1bn.
Back in August, the DCG announced reaching an in-principle agreement to recover Genesis Global’s creditor funds in an attempt to settle claims that surfaced following its bankruptcy. As stated in its bankruptcy filings, Genesis owed over $3.5bn to its top 50 creditors, including Gemini which used to offer the Earn product to crypto lenders in partnership with Genesis.
According to the agreement, unsecured creditors may receive a recovery of between 70% and 90% in US dollar equivalent, attempting to resolve the lingering disputes while achieving a fair recovery for creditors. It also said that the recovery on an in-kind basis would range between 65% and 90%, depending on the exact percentage contingent on the denomination of digital assets involved.
