Genesis Sues Gemini Over $689 Million Withdrawal

Reading Time: 2 minutes
  • Genesis has opened a new legal front against Gemini, suing it for over $689 million in alleged “preferential transfers”
  • The lender is using bankruptcy law to try and claw back the huge withdrawal
  • This new lawsuit represents an extension of their existing disputes

Genesis has opened up a new front in its legal battle against Gemini after suing the exchange for $689 million in “preferential transfers,” accusing the exchange of withdrawing the sum from Genesis “on or within ninety (90) days” prior to the latter’s bankruptcy filing. This time period is crucial because it allows Genesis the legal right to attempt to claw back the funds, although Genesis will naturally do all it can to fight the claim. The two companies have been at loggerheads over their various entanglements since late last year, and this new lawsuit is simply an extension of existing arguments. 

Public Feud Steps Up a Gear

The public and legal feud between Genesis and Gemini erupted following the collapse of FTX last November. Genesis, having filed for bankruptcy in January this year, sued its parent company, Digital Currency Group (DCG), in September seeking over $600 million in loan repayments. Simultaneously, Gemini sued Genesis over 60 million shares in Grayscale Bitcoin Trust, valued at $1.6 billion.

At the same time, US authorities joined the legal battle, with the Securities and Exchange Commission (SEC) alleging in January that Genesis and Gemini sold unregistered securities. Recently, New York Attorney General Letitia James filed a lawsuit against DCG, Genesis, and Gemini, accusing them of defrauding over 230,000 investors, including 29,000 New Yorkers, of more than $1 billion.

Genesis Turns Bankruptcy Law to Its Advantage

This latest twist in the tale comes through the accusation that Gemini withdrew the $689 million prior to Genesis going bankrupt, which Genesis says led to Gemini benefiting “at the expense of Plaintiff’s other creditors” which it continues to do to this day “through their retention of the property Plaintiff seeks to avoid and recover.”

Genesis is using “remedies provided by the Bankruptcy Code in order to correct this unfairness,” using the clawback feature allowed within bankruptcy law which, ironically, FTX used against Genesis in May when it tried to recover nearly $4 billion from from the embattled lender. This deal was settled in August for a much more reasonable $175 million, and now Genesis is trying the same trick with Gemini.

Given the fractious relationship between the two companies, it is likely that Gemini will come out fighting rather than settle, at least in the immediate future, although their hand may be forced by bankruptcy laws months down the road.