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- The assets withdrawn were used to build a reserve so that Gemini Earn customers could get immediate redemptions.
- Gemini, Genesis and the latter’s parent company, DCG, have been embroiled in a legal settlement matter for months now.
Crypto exchange Gemini “secretly” withdrew $282 million in crypto from crypto lender Genesis in August 2022. It was months before the latter filed for bankruptcy in January 2023, the New York Post reported on 27 September.
The report cites anonymous sources to make the further claim that these crypto assets were used to build a reserve so that Gemini Earn customers could get immediate redemptions. None of these funds were sent directly to Gemini’s billionaire founders, the Winklevoss twins.
Gemini and Genesis gave the customers the chance to earn returns on their crypto tokens in the Earn program. Shortly after Genesis filed for bankruptcy, the U.S. Securities and Exchange Commission (SEC) sued both Gemini and Genesis, alleging that the Earn program constituted an unregistered offer and sale of securities.
In May, Gemini filed a motion in court to have the lawsuit dismissed.
It was the collapse of Sam-Bankman Fried’s FTX [FTT] in November 2022 that led to a liquidity crisis at Genesis. The crypto lender soon froze customer withdrawals, and filed for Chapter 11 bankruptcy in January 2023.
Following the trail…
Gemini, Genesis, and the latter’s parent company, Digital Currency Group (DCG) — all three of them have been embroiled in a legal settlement matter for months now.
In July, Gemini sued DCG for fraud after all the negotiations failed. Gemini claimed that DCG misinterpreted financial statements to recover Gemini Earn funds from Genesis before it filed for bankruptcy.
Gemini also said it had sought to terminate the Earn program in October 2022 itself. One of its founders even had a face-to-face meeting with DCG founder Barry Silbert. But Silbert didn’t give correct information about Genesis’ poor finances. In August, DCG moved to court to have Gemini’s lawsuit dismissed.
Earlier this month, Genesis sued DCG for over $620 million in unpaid loans. In fact, DCG owes more than $1.65 billion to Genesis, including loans worth $575 million and a promissory note worth $1.1 billion.
Recently, Gemini wildly criticized Gemini’s latest bankruptcy plan. Gemini said its Earn users will not recover “anything close [to the] real value” of the money they’re owed under the proposal. The proposal was “misleading at best and deceptive at worst.”
In conclusion, DCG owes more than $1.65 billion to Genesis, which, in turn, owes $1.1 billion to Gemini.