Genesis Sues Gemini To Recover $689M Of ‘Preferential Transfers’

In a recent court filing dated November 21, cryptocurrency lender Genesis Global Capital has initiated legal proceedings against Gemini, seeking to recover $689 million in preferential transfers. 

The lawsuit alleges that during the crucial 90-day period preceding Genesis’s declaration of bankruptcy in January, Gemini withdrew approximately $689,302,000. Genesis contends that this withdrawal occurred at the expense of other creditors and insists that Gemini continues to benefit by retaining property that Genesis aims to recover.

Background of the Legal Dispute

The legal battle between these two cryptocurrency giants stems from the fallout of the FTX crypto exchange in November 2022. Following the collapse, Genesis and Gemini found themselves entangled in a public feud over the recovery of funds. The dispute intensified, leading to the current lawsuit.

Genesis’s lawsuit emphasizes that Gemini’s actions were detrimental to other creditors, and the plaintiff is seeking remedies under the United States Bankruptcy Code to rectify the perceived unfairness. The court is asked to intervene and restore equity by placing Gemini in a position equivalent to other similarly situated creditors of Genesis.

Beyond the legal arena, the CEOs of both companies engaged in public spats, exchanging accusations of noncooperation and threatening legal action. In a proactive move, Gemini had previously filed an adversary proceeding against Genesis, attempting to use shares of its Grayscale Bitcoin Trust as collateral for loans provided through the Gemini Earn program.

Implications for Gemini and Genesis

The stakes are high in this legal showdown. Gemini’s collateral, comprising over 62 million shares of the Grayscale Bitcoin Trust, is currently valued at approximately $1.6 billion. The legal outcome will determine Gemini’s financial liability and impact the broader cryptocurrency landscape.

This latest development adds another layer to the ongoing legal saga involving Genesis, Gemini, and their respective CEOs. As the courts grapple with the intricate details of preferential transfers, the cryptocurrency community watches closely, anticipating the potential precedent-setting implications of this high-stakes legal confrontation.