In a growing dispute between two crypto industry titans, Genesis Global Capital is taking legal action against Gemini Trust, seeking to reclaim over $689 million in what it terms as ‘preferential transfers’.
What Happened: According to a CoinDesk report on Tuesday, Genesis accuses Gemini of making preferential transfers at the detriment of other creditors. Through the court’s intervention, Genesis aims to rectify this perceived injustice.
The two firms have been entangled in a contentious legal and public quarrel following the downfall of FTX. Genesis, a subsidiary of Digital Currency Group (DCG), entered bankruptcy in January 2023. Prior to this, Gemini had lodged a lawsuit against DCG in July, attacking what DCG referred to as “defamatory” assertions and a “publicity stunt.”
The Winklevoss twins, Tyler and Cameron, founders of Gemini, are also implicated in the lawsuit. In October, Gemini sued Genesis over 60 million shares of Grayscale Bitcoin Trust (GBTC), approximated to be worth $1.6 billion.
U.S. authorities are closely monitoring the ongoing legal drama. The U.S. Securities and Exchange Commission (SEC) charged Genesis and Gemini with selling unregistered securities just days prior to Genesis declaring bankruptcy. In a more recent development, New York Attorney General Letitia James initiated a lawsuit against DCG, Genesis, and Gemini, accusing them of defrauding more than 230,000 investors of over $1 billion.
Genesis maintains that Gemini made “unprecedented withdrawals” that led to a “run on the bank” during a period of market instability triggered by the collapse of Terraform Labs and digital asset hedge fund Three Arrows Capital.
Why It Matters: The ongoing litigation between Genesis and Gemini underscores the increasing regulatory scrutiny that crypto companies are facing. With allegations of unregistered securities sales and investor fraud, this case could have significant implications for the broader crypto industry. In particular, it brings to light the potential risks for investors and the need for greater transparency and regulatory oversight in the crypto sector.