Coinspeaker
Genesis Sues Gemini Seeking Return of $689M in Preferential Transfers
Genesis Global Capital, a cryptocurrency lender, has filed a lawsuit against the Gemini cryptocurrency exchange, seeking the return of over $689 million in alleged preferential transfers. The embattled companies have been embroiled in a legal battle since the collapse of the major cryptocurrency exchange FTX last November.
Genesis claims that, as market volatility increased, Gemini made significant withdrawal demands that harmed other creditors. The lawsuit focuses on transactions that occurred in the 90 days preceding Genesis’ bankruptcy filing in January. Certain transfers made prior to filing for Chapter 11 protection can be challenged by the courts under US bankruptcy law in order to fairly distribute assets. Genesis claims Gemini was aware of its precarious financial situation when it demanded repayment.
The lawsuit is the latest development in the saga of the former partners. Their problems began last summer when crypto hedge fund Three Arrows Capital went bankrupt. This resulted in a loss of customer trust and liquidity issues for Genesis and other cryptocurrency lenders. When FTX went bankrupt, panic spread to Gemini’s lending program with Genesis. According to the lawsuit, over $765.8 million in net transfers were made from Genesis to Gemini alone in September and October 2022. Genesis contends that these should be treated as preferential transfers subject to legal scrutiny.
Gemini, for its part, has denied allegations that it acted inappropriately in advance of its partner’s bankruptcy. The company has emphasized its responsibility to users as well as its commitment to seeking compensation for losses.
The Genesis-Gemini Saga Has Birthed Several Legal Cases
The dispute has also piqued the interest of US authorities. The Securities and Exchange Commission launched an investigation into Gemini and Genesis in January for unregistered securities offerings. The New York Attorney General, Letitia James, last month filed a lawsuit against the following companies: Gemini, Genesis, and Digital Currency Group (DCG), which is Genesis’s parent company, accusing them of fraud and illegal behaviour amounting to more than $1 billion against more than 230,000 investors, which includes close to 30,000 users from New York.
Digital Currency Group, which is embroiled in its own financial difficulties, has been named in lawsuits by both Genesis in September and Gemini in July. However, DCG regarded Gemini’s filing as intended to damage its reputation and also just a public stunt, suggesting that the company’s allegations were only for public attention rather than based on facts. Genesis’s case was to get repayments for multiple loans that the company had taken from it in the past, which amounts to around $600 million.
The unfolding legal mess signals further challenges for the crypto industry. The outcome of Genesis’ bid to recoup funds from Gemini is still undetermined. The proceedings, on the other hand, promise to be closely watched for implications regarding liability and regulation in the nascent digital asset sector.
Genesis Sues Gemini Seeking Return of $689M in Preferential Transfers
