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November 23, 2023
Winklevoss twins’ crypto exchange sued by Genesis for $689M

Cryptocurrency lender Genesis Global Capital LLC filed a lawsuit on Tuesday against its partner Gemini Trust Company LLC, seeking to recover over $689 million that customers withdrew in the months leading up to Genesis’ bankruptcy in January 2023.

According to a Nov. 22 New York Post report, the lawsuit centers around the companies’ “Earn” program, which allowed customers to lend their crypto assets to Genesis to earn interest. Genesis then reinvested those assets to generate returns. Gemini, operated by Cameron and Tyler Winklevoss who are known for their dispute with Meta CEO Mark Zuckerberg, acted as the custodian for the Earn program, processing deposits and withdrawals.

According to the lawsuit, approximately 230,000 Earn users withdrew more than half a billion dollars from the program in the 90 days prior to Genesis filing for bankruptcy. Genesis argues that these withdrawals should be considered preferential transfers under U.S. bankruptcy law, allowing the funds to be clawed back so that assets can be more fairly distributed among all creditors.

Gemini responded by stating that Genesis should fully repay customers rather than targeting users who withdrew their assets when they had the chance. “This attack on Earn Users is a new low, even for Genesis,” Gemini wrote in a statement.

Far from over

The bankruptcy filing caps a turbulent few months for Genesis. The company froze customer redemptions in November 2022 after the collapse of cryptocurrency exchange FTX caused significant stress in digital asset markets. Genesis would go on to file for Chapter 11 bankruptcy protection the following January.

Both Genesis and Gemini have faced scrutiny from U.S. regulators over the unraveling of the Earn program. In January, the Securities and Exchange Commission sued the companies along with Genesis’ parent, Digital Currency Group. Additionally, New York Attorney General Letitia James filed a lawsuit in October alleging over $1 billion in investor fraud.

Internal divisions have also emerged amongst participants in the Earn program. The Winklevoss’ company, had previously sued both Genesis and Digital Currency Group. Meanwhile, Genesis filed its own lawsuit against Digital Currency Group for over $600 million in unpaid loans.

The bankruptcy proceedings and competing legal claims create uncertainty around if and when Earn users will be made whole. Genesis’ decision to move forward with a Chapter 11 liquidation while these issues remain unresolved suggests customers face a long road to recovering all of their invested crypto assets.

Featured image: TechCrunch, CC BY 2.0 via Wikimedia Commons

The post Winklevoss twins’ crypto exchange sued by Genesis for $689M appeared first on ReadWrite.

 

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