Genesis Global: Gemini files lawsuit over $1.6 billion in digital assets

By Sarah Lizee

Olympia, Wash., Oct. 27 – Genesis Global Holdco, LLC is facing a lawsuit from former partner Gemini Trust Co. that seeks the recovery of around $1.6 billion in digital assets, according to an adversary complaint filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

Gemini said that in 2022 it entered into a security agreement through which Genesis promised to deliver to Gemini 62.09 million shares of Grayscale Bitcoin Trust in two tranches as collateral to secure all of the loans made by 232,000 Gemini users to Genesis through the Gemini Earn Program.

Currently, the collateral is worth nearly $1.6 billion, an amount that would completely secure and satisfy the claims of every single Earn user, Gemini said.

“Starting in the summer of 2022 and continuing to the present day, Genesis has repeatedly taken actions to harm Earn users and to hinder and delay Earn users’ recovery of their digital assets,” Gemini said in the complaint.

Gemini claims Genesis deprived Earn users of the benefit of the collateral through a series of pre- and post-petition decisions, including challenging the validity of Gemini’s foreclosure on a portion of the collateral, putting application of the foreclosure proceeds in limbo for nearly a year.

Genesis also halted delivery of the other portion of the collateral to Gemini for the benefit of Earn users, and proposed a plan of reorganization that would funnel value away from Earn users to other creditors, Gemini said.

“Genesis’s plan of reorganization improperly and artificially suppresses Earn users’ deficiency claim, and it provides for the distribution of a portion of the collateral to other creditors that was specifically earmarked and provided for the benefit of Earn users,” Gemini stated.

Gemini is requesting a determination that the collateral belongs to Earn users, as well as the value of its Earn users’ deficiency claim.

Genesis Global is a New York-based cryptocurrency lender that filed bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York on Jan. 19, 2023 under Chapter 11 case number 23-10063.

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