Bankrupt Genesis sued by Gemini over $1.6B worth of GBTC shares

Gemini is now targeting Genesis in an attempt to recover roughly 62 million shares GBTC shares

October 27, 2023 04:47 pm

Poetra.RH/Shutterstock modified by Blockworks

Gemini filed a complaint on Friday alleging that the bankrupt crypto lender owes Gemini roughly $1.6 billion, or around 62 million shares of Grayscale Bitcoin Trust (GBTC).

Gemini claims that the two companies had a security agreement delineating that the 62 million shares be used as collateral.

The company claims its “efforts have been undermined by Genesis’s actions prior to and following the commencement of its bankruptcy proceeding.”

“Genesis has repeatedly taken actions to harm Earn Users and to hinder and delay Earn Users’ recovery of their digital assets,” Gemini claimed.

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But, if the collateral was delivered, then the “amount that would completely secure and satisfy the claims of every single Earn User,” Gemini alleges.

DCG declined to comment.

Back in September, Digital Currency Group — the parent company of Genesis — submitted a filing claiming that it worked out a plan that would see an expected recovery rate of 95% to 100% for Earn users. Gemini, however, pushed back against the plan and the claim and accused DCG of “gaslighting” creditors.

DCG, Gemini and Genesis are all twisted together through various legal actions at the moment — from the Gemini suit against DCG to the New York Attorney General’s suit against all three companies and DCG CEO Barry Silbert.

If the court sides with Gemini, then the company claims the “additional Collateral would facilitate the return of more than $1 billion in digital assets that Genesis has wrongfully withheld from Earn Users for nearly a year.”

The two had reportedly attempted to resolve the issues out of court, but were unable to.

Genesis filed for bankruptcy earlier this year, after pausing customer withdrawals last November.

DCG and Genesis worked out a tentative chapter 11 deal back in August. In a shareholder letter earlier this month, DCG said it sees around 70% to 90% recovery for creditors in the Genesis bankruptcy.

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