Genesis says the Winklevoss-founded crypto exchange benefited at the expense of Genesis’ creditors when it withdrew the money at the beginning of the crypto winter.
Genesis Global Capital, a crypto brokerage firm owned by Digital Currency Group (DCG), is seeking $689 million from Gemini, saying the Winklevoss-founded crypto exchange benefited at the expense of Genesis’ creditors.
In a Nov. 21 lawsuit filed in U.S. District Court for the Southern District of New York, lawyers representing Genesis claim that Gemini withdrew nearly $690 million from its client “at the nadir of the significant cryptocurrency market turmoil,” which started in the spring of 2022.
In an effort “to correct this unfairness,” Genesis is now seeking to recover the money from Gemini as the crypto exchange continues to benefit from that withdrawal “to this day” through retention of the assets, lawyers for the New York-based broker added.
“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.”
Cleary Gottlieb Steen & Hamilton LLP
Genesis and Gemini remain locked in a legal battle following FTX’s implosion. Several marquee crypto entities fell into insolvency soon after the now defunct exchange founded by Sam Bankman-Fried collapsed last year, triggering several contagion events that impacted billions of dollars in users funds and financial institutions alike.
Genesis Global filed for Chapter 11 bankruptcy protection earlier in 2023, joining a string of crypto enterprises that have faced insolvency after FTX’s collapse. In late Oct. 2023, Gemini filed a lawsuit against Genesis, seeking ownership over some 60 million GTBC shares offered as collateral by Genesis Global.
Gemini said the GBTC shares worth more than $1.5 billion “would completely secure and satisfy the claims of every single Earn User,” a lending program which was closed by Gemini after nearly 340,000 users were left stranded after Genesis froze withdrawals in late 2022.
Both firms were also sued by the U.S. Securities and Exchange Commission (SEC) in early 2023 for unlawful securities sales through the Earn program. New York Attorney General Letitia James filed a $1 billion civil lawsuit against Gemini, Genesis, and DCG for their roles in allegedly defrauding thousands of American investors.
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