Crypto exchange Gemini has taken legal action against digital asset lender Genesis in a bid to gain control over approximately $1.6 billion worth of Grayscale Bitcoin Trust shares. The lawsuit, filed last Friday in the U.S. Bankruptcy Court Southern District of New York, is aimed at recovering the shares to reimburse clients of Gemini’s Earn program.
The conflict between Gemini and Genesis arose last year when Genesis served as a primary lending partner for Gemini’s Earn product. The Earn program provided customers with the opportunity to generate returns on their cryptocurrency holdings. However, in the wake of the collapse of major crypto exchange FTX and the subsequent industry-wide upheaval, Genesis ceased withdrawals, leaving Earn clients uncertain about the status of their funds.
Gemini’s objective is to reclaim the funds and meet its commitments to its clients. The lawsuit emphasizes that the collateral, now valued at nearly $1.6 billion, would fully secure and satisfy the claims of all Earn users.
The main impediment in this endeavor, according to Gemini, is Genesis. In a blog post addressing the lawsuit, Gemini stated that Genesis is impeding efforts to compensate Earn users and is attempting to redirect the value to other creditor groups.
Genesis operates under the umbrella of Digital Currency Group (DCG), which also oversees the Grayscale Bitcoin Trust, the largest Bitcoin fund in the world. The lawsuit alleges, “Genesis has repeatedly taken actions to harm Earn users and to hinder and delay Earn users’ recovery of their digital assets.”
The legal battle between Gemini and Genesis has drawn significant attention in the cryptocurrency community, as it could potentially set a precedent for disputes in the emerging digital asset lending sector. Both parties are expected to present their arguments in court, and the outcome will be closely monitored by industry participants and observers.