In a recent development, the Gemini crypto exchange has introduced a lawsuit against the crypto platform Genesis Global over the ownership of shares of the Grayscale bitcoin Trust (GBTC).
According to the lawsuit, the exchange is seeking a determination from a federal judge to establish that Genesis is not entitled to more than 60 million GBTC shares pledged as collateral for loans made by its users. Gemini maintains that these shares should not be used to pay Genesis’ other creditors.
Gemini Seeks Court Determination to Secure More Than 60 Million GBTC Shares
According to the lawsuit filed on Friday, October 27, 2023, the exchange entered into a security agreement with Genesis. Genesis reportedly promised to deliver 62,086,586 GBTC shares in two tranches as collateral to secure loans granted by Gemini users.
Notably, the value of the warranty is currently estimated at almost $1.6 billion, which would fully guarantee the claims of all Gemini users. However, the company alleges that Genesis has “taken steps to harm” its users and hinder the recovery of its warranties.
These actions allegedly include challenging the validity of Gemini’s foreclosure on a portion of the collateral, stopping delivery of the remaining collateral to the company, and proposing a reorganization plan that would divert value from its users to other creditors.
Genesis now seeks to use the current value of the collateral rather than the exchange’s foreclosure proceeds to determine Gemini users’ deficiency claim. The exchange maintains that only its users should be entitled to any profits resulting from the risk it assumes.
Court declaration on collateral property
Gemini also notes that Genesis’ proposed reorganization plan distributes the liquidated value of the collateral to other general unsecured creditors, rather than to Gemini users as originally intended.
Considering these developments, the exchange requests that the court declare that it properly executed the initial guarantee and that the amount to be offset against the deficiency claim should be the execution value.
The US-based company also seeks a declaration of its secured interest in the additional collateral or that Genesis holds the additional collateral in constructive trust for the benefit of Gemini users.
According to the filing, Gemini has repeatedly asked Genesis for confirmation regarding the transfer of the additional collateral, but Genesis has not responded or completed the transfer.
The exchange founded by the Winklevoss twins is seeking a court ruling that resolves these issues and allows the distribution of the guarantee proceeds to the company’s shareholders. users. gemini lawyers bitcoin-trust-shares#xj4y7vzkg” target=”_blank” rel=”noopener nofollow”>fixed:
It is time to resolve these issues so that Genesis can move forward with a reasonable reorganization plan and Gemini can distribute the proceeds of the Guarantee to Winning Users.
The Earn program allowed users to earn interest on their cryptocurrency holdings. However, following Genesis’ filing for bankruptcy protection, all withdrawal requests were suspended, leaving users unable to access their funds.
Featured image from Shutterstock, chart from TradingView.com
