Gemini, a cryptocurrency exchange, has filed a lawsuit against its former business partner, Genesis Global, in connection with its Gemini Earn product, seeking to recover over 60 million shares of the Grayscale Bitcoin Trust (GBTC) that were provided as collateral.
In the context of Genesis' bankruptcy proceedings, Gemini aims to gain control of the GBTC shares, which, according to Gemini, "would completely secure and satisfy the claims of every single Earn customer," whose funds were frozen when Genesis halted withdrawals last year.
The lawsuit alleges that "Genesis has taken repeated actions to harm Earn users and hinder the recovery of their digital assets." It also emphasizes the need to resolve these issues so that Genesis can proceed with a reasonable reorganization plan while Gemini distributes the collateral proceeds to Earn users.
This move comes just a week after New York Attorney General Letitia James filed a separate lawsuit against Gemini, Genesis, and DCG, alleging fraud involving over 230,000 investors and totaling more than $1 billion.
Both Gemini and Genesis faced challenges in 2022 following the collapse of the cryptocurrency hedge fund Three Arrows Capital and Sam Bankman-Fried's FTX, which led to Genesis filing for bankruptcy in January.
In September, Genesis and DCG announced that Gemini Earn customers would be "almost entirely" compensated under a proposed remuneration agreement.
Another noteworthy aspect is the consensus between Genesis and Gemini regarding the U.S. Securities and Exchange Commission (SEC) accusations that Earn was an unregistered security. In May, both companies requested the court to dismiss the SEC's lawsuit against the program.