Genesis Global Capital sues Gemini to recover ‘preferential transfers’ of $689 million

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In a further development in the aftermath of the FTX exchange collapse in November 2022, bankrupt cryptocurrency lender Genesis Global Capital has launched a legal action against cryptocurrency exchange Gemini. Genesis is seeking the recovery of approximately $689 million in preferential transfers, alleging that Gemini withdrew this substantial amount during the 90-day period leading up to Genesis’s bankruptcy filing in January. The lawsuit contends that Gemini’s actions disadvantaged other creditors and continued to benefit the exchange through the retention of the assets Genesis is now striving to recover.

This legal dispute is part of an ongoing public feud between the two crypto giants, which has not only resulted in court battles but has also seen public spats between their CEOs, accusing each other of non-cooperation and even resorting to threats of legal action.

On October 27, Gemini filed an adversary proceeding against Genesis in response to the legal challenge. The exchange aims to leverage 62,086,586 shares of its Grayscale Bitcoin Trust, which were used as collateral for loans made through the Gemini Earn program. These loans were extended by 232,000 Gemini users to Genesis, and the collateral is currently valued at around $1.6 billion.

Genesis filed for bankruptcy in January after suspending withdrawals in November 2022, a move that significantly impacted the Gemini Earn program. Consequently, Gemini took legal action against Genesis’s parent company, Digital Currency Group (DCG), and its CEO, Barry Silbert, alleging fraud in July. In September, Genesis responded by suing DCG, seeking repayment for multiple loans totaling over $600 million.

This ongoing legal battle highlights the complex challenges and disputes within the cryptocurrency industry, particularly concerning fund recovery and conflicts among major players. The outcome of these legal proceedings could significantly impact the dynamics of the cryptocurrency lending and exchange sector.