This complaint follows a similar one filed by NYAG Letitia James a week earlier.
Gemini has launched an action to acquire possession of the GBTC shares.
In a lawsuit against Genesis Global, crypto exchange Gemini seeks to recover 60 million shares of the Grayscale Bitcoin Trust (GBTC) that were committed as collateral for the Gemini Earn product.
To access the funds that were frozen when Genesis temporarily stopped processing withdrawals last year, Gemini has launched an action as part of Genesis’ bankruptcy case to acquire possession of the GBTC shares, which, according to Gemini, “would completely secure and satisfy the claims of every single” Earn client.
The lawsuit alleged:
“Genesis has repeatedly taken actions to harm Earn users and to hinder and delay Earn users’ recovery of their digital assets.
Uncertainty for Investors
This complaint follows a similar one filed by New York Attorney General Letitia James a week earlier, which accused Gemini, Genesis, and DCG of scamming over 230,000 investors out of over $1 billion. After the failure of crypto hedge fund Three Arrows Capital and Sam Bankman-Fried’s FTX in early 2022, both Gemini and Genesis found themselves in financial distress.
Customers of Gemini Earn were promised to be “nearly whole” under a planned compensation agreement announced by Genesis and DCG in September. Unsecured creditors may receive a baseline recovery of 70–90% under this arrangement. However, it would be much greater for Gemini Earn users. Regretfully, Gemini asserted that this was an inaccurate assertion.
The Genesis and Gemini have also reached a consensus on another issue, strongly rejecting claims made by the United States SEC that Earn was an unregistered security. In May, the corporations formally requested that a judge throw out a complaint filed by the SEC against the initiative.