Gemini Files Lawsuit Against Genesis Over Control of GBTC: A Contentious Battle Unfolds

Introduction

Gemini Trust Co., led by the Winklevoss twins, has filed a lawsuit against Genesis and its parent company Digital Currency Group (DCG) over the control of Grayscale Bitcoin Trust (GBTC). This legal battle stems from a dispute regarding the Gemini Earn program, where users could lend digital assets to Genesis Global.

The Basis of the Lawsuit

Gemini operated the Gemini Earn program, allowing users to lend digital assets to Genesis Global. Genesis then used these funds to provide loans to large organizations, returning only a fraction of the profits. However, a significant portion of these loans were high-risk and involved third parties like FTX's sister trading firm Alameda Research.

As part of their agreement, Genesis had pledged approximately 60 million shares of GBTC as collateral to the Earn product users. With the deteriorating relationship between Gemini and Genesis, Gemini is now seeking control over the GBTC, which is currently valued at $1.6 billion. Gemini argues that the GBTC shares should be used to repay the creditors lined up in Genesis' bankruptcy proceedings.

DCG Proposal Rejected

DCG, the parent company of Genesis, had proposed a remuneration plan to compensate the affected retail creditors. This plan offered a baseline recovery of 70-90% for unsecured creditors, with significantly higher compensation for Gemini Earn users. However, Gemini rejected this proposal, considering it misleading.

Pending Lawsuit

In addition to the ongoing legal battle between Gemini and Genesis, the New York Attorney General, Letitia James, has taken legal action against all three crypto firms. The lawsuit accuses them of defrauding 230,000 customers and swindling over $1 billion.

Conclusion

Gemini's lawsuit against Genesis over the control of GBTC highlights the contentious nature of their relationship. As the legal battle unfolds, the fate of the GBTC shares and the compensation for affected creditors remain uncertain. This case serves as a reminder of the risks and challenges faced in the cryptocurrency industry.