Gemini and Genesis, two prominent players in the cryptocurrency world, have become embroiled in a contentious legal feud over control of the $1.6 billion held as Grayscale Bitcoin Trust (GBTC) shares.

This lawsuit adds another layer of complexity to an ongoing dispute between the two companies, fueled by the Gemini Earn program and financial disagreements.

The Genesis-Gemini Dispute

Gemini operated the Gemini Earn program, which allowed users to lend their digital assets to Genesis Global through a tri-party contract. Genesis, in turn, lent these funds to various organizations, returning only a fraction of the profit.

A substantial portion of these loans carried high risk, with third parties like FTX’s sister trading firm Alameda Research heavily involved.

The Genesis-Gemini Agreement

As part of their agreement, Genesis had pledged approximately 60 million shares of the Grayscale Bitcoin Trust (GBTC) as collateral for the Gemini Earn product users. However, as their relationship soured, Gemini has initiated legal action to gain control over these GBTC shares, now valued at $1.6 billion.

Legal Battle Erupts as Gemini Sues Genesis Over Control of $1.6 Billion GBTC

In their lawsuit, Gemini seeks a court ruling to strip Genesis of control over the GBTC shares. Preventing their use for repaying Genesis creditors involved in bankruptcy proceedings.

Gemini’s argument rests on the notion that these GBTC shares should serve as ample collateral to satisfy the claims of all Earn customers whose funds were locked in Genesis when withdrawals were suspended last year. Notably, a significant portion of these GBTC shares are held by Genesis and its affiliates.

DCG’s Proposal Rejected

Digital Currency Group (DCG) had previously proposed a compensation plan to provide relief to affected retail creditors and resolve months of uncertainty. This plan offered unsecured creditors a baseline recovery of 70-90%, with Gemini Earn users expected to receive a significantly higher recovery rate.

However, Gemini rejected this proposal, claiming it was misleading and inadequate.

New York Attorney General’s Lawsuit

Complicating matters further, there is an additional lawsuit involving Gemini, Genesis, and DCG. New York Attorney General Letitia James has also taken legal action against these three crypto firms, alleging they defrauded 230,000 customers and swindled over $1 billion.

Lastly, in the midst of this ongoing legal battle, the fate of the $1.6 billion in GBTC shares remains uncertain, leaving both companies locked in a bitter struggle for control.

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Tanishi is an established writer in the realm of cryptocurrency and blockchain, renowned for her expertise and insightful analysis. With a deep-rooted passion for the dynamic world of digital finance, Tanishi delivers compelling news and articles that captivate a wide-ranging audience.