Gemini Trust Co. has filed a lawsuit against Genesis over who will take control of the $1.6 billion Grayscale Bitcoin Trust (GBTC).
As part of a tri-party agreement, Gemini operated a program that permitted users to lend digital assets to Genesis Global.
Genesis distributed the Gemini Earn aggregated funds as loans to large organizations and returned only a fraction as profit to utilize the capital. Significant proportions of these loans were high-risk and backed by third parties, including FTX’s subsidiary trading firm, Alameda Research.
Genesis had pledged approximately 60 million shares of the Grayscale Bitcoin Trust (GBTC) as collateral to Earn product users per the parameters of their agreement.
Gemini is attempting to seize possession of the $1.6 billion GBTC despite the deterioration of their relationship. According to the filing, Gemini asked the judge to determine that Genesis no longer has control over the GBTC shares and that they should not be used to repay any of Genesis’ creditors in its bankruptcy proceedings.Â
In Gemini’s argument, the company asserted that the GBTC shares would be sufficient to fully secure and satisfy the claims of every Earn customer whose funds were held in Genesis when the company suspended withdrawals on its platform last year. Notable is that Genesis and its affiliates own the majority of these shares.
Gemini Rejects DCG Proposal
The parent company of Genesis, DCG, had previously proposed a compensation plan that would have provided full compensation to all affected retail creditors and ended months of uncertainty.
Following this scheme, unsecured creditors could recover at least 70 to 90%. At the same time, the percentage of Gemini Earn users would be considerably higher. Unfortunately, Gemini argued that this was a deceptive assertion.
In the meantime, litigation is pending against Gemini, Genesis, and DCG. New York Attorney General Letitia James filed a lawsuit against three crypto firms for defrauding 230,000 consumers and over $1 billion.Â
