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Winklevoss twins’ crypto exchange sued by Genesis for $689M

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An entity called Genesis Global Capital LLC is taking legal action against its partner Gemini Trust Company LLC, in an attempt to recover more than $689 million that customers withdrew prior to Genesis declaring bankruptcy in January 2024.

The lawsuit is centered around the “Earn” program, which allowed customers to lend their cryptocurrency assets to Genesis in exchange for interest, with Gemini serving as the custodian for the program. According to the lawsuit, approximately 230,000 Earn users withdrew over half a billion dollars from the program in the 90 days leading up to Genesis’ bankruptcy filing. Genesis contends that these withdrawals should be considered preferential transfers under U.S. bankruptcy law, and the funds should be returned to enable a more equitable distribution among all creditors.

Gemini’s response emphasizes the importance of Genesis repaying customers in full rather than targeting those who withdrew their assets. The bankruptcy filing comes after a turbulent period for Genesis, which saw the company freezing customer redemptions in November 2022 following the collapse of cryptocurrency exchange FTX, causing market stress in digital asset markets and ultimately leading to Genesis seeking Chapter 11 bankruptcy protection in January.

Both Genesis and Gemini have been subject to regulatory scrutiny, with the Securities and Exchange Commission suing the companies, including Genesis’ parent company, Digital Currency Group. Additionally, the New York Attorney General has filed a lawsuit alleging over $1 billion in investor fraud. Internal disputes have also emerged among participants in the Earn program, resulting in legal claims and uncertainty regarding the recovery of invested crypto assets for customers.

The ongoing bankruptcy proceedings and competing legal claims cast doubt on the timeline for and likelihood of full restitution for Earn users. Genesis’ decision to proceed with a Chapter 11 liquidation amid these uncertainties suggests that customers may face a protracted process to recover all of their invested crypto assets.

Far from over

Featured image: TechCrunch, CC BY 2.0 via Wikimedia Commons

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