In January, Genesis Global Capital filed for bankruptcy and seeks to recover $689 million in preferential transfers from Gemini in a new lawsuit. This legal dispute began after the collapse of the FTX crypto exchange, which sparked a public feud between Genesis and Gemini over the recovery of funds, leading to full-fledged lawsuits. Genesis claims that during the 90 days preceding its bankruptcy filing, Gemini withdrew an aggregate gross amount of no less than approximately $689,302,000, which occurred at the expense of other creditors. Genesis’s legal team has called upon the court to restore parity among all creditors using remedies provided by the United States Bankruptcy Code.
The CEOs of both companies have engaged in public disputes, accusing each other of non-cooperation and even issuing threats of legal action. Gemini filed an adversary proceeding against Genesis, aiming to leverage 62,086,586 shares of its Grayscale Bitcoin Trust, which had been used as collateral to secure loans extended to Genesis through the Gemini Earn program. Currently, the collateral is estimated to be approximately $1.6 billion.
In other related news, scrutiny has been placed on Cameron and Tyler Winklevoss, the co-founders of cryptocurrency exchange Gemini, following reports of an alleged secret withdrawal of $282 million from the now-bankrupt crypto lender Genesis. The funds withdrawn included various cryptocurrencies, such as Bitcoin, Ethereum, Gemini’s stablecoin, Dogecoin, and more. Whether the funds were corporate assets or part of the Winklevoss twins’ crypto holdings is still being determined. The timing of this withdrawal, just months before Genesis suspended customer withdrawals, raises suspicions about whether the Winklevoss twins were aware of the impending collapse.
The Winklevoss twins had previously sued DCG, the parent company of Genesis, and its CEO, Barry Silbert, alleging they were provided with misleading information about Genesis’s financial health. The bankruptcy filing by Genesis in January had a ripple effect on the Gemini Earn program. The lawsuit claimed that DCG offered a promissory note instead of the promised financial backing. Despite their attempts to exit the Gemini Earn partnership, the Winklevoss twins asserted that Silbert convinced them otherwise during a face-to-face meeting.
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