Gemini Trust’s legal representatives have contested a Digital Currency Group (DCG) proposal regarding the Genesis Global creditors.
In a September 15 filing submitted to the United States Bankruptcy Court for the Southern District of New York, the legal team accused DCG of employing deceptive tactics, labeling them as “gaslighting” with their recovery plan.
The recovery plan was officially submitted to the bankruptcy court on September 13. It asserted that unsecured creditors could recover from 70% to 90%, with a substantial portion provided in digital currencies.
Gemini Earn platform users were informed of potential recoveries ranging from 95% to 110% for their claims. The legal representatives representing Gemini Trust have raised concerns. They suspect DCG aims to coax Gemini Lenders into a lower settlement for their alleged debt.
They have urged DCG to substantially enhance the terms of the loans extended to Genesis and refrain from using Genesis’ bankruptcy proceedings to justify the terms of the recovery plan.
The filing submitted on September 15 explicitly stated:
To distract the Genesis creditors from the inconvenient facts of its facially inadequate and inequitable proposal, DCG touts proposed recovery rates that are a total mirage — misleading at best and deceptive at worst. Make no mistake: Gemini Lenders will not receive anything close in real value terms to the proposed recovery rates under the current ‘agreement in principle.’
This legal battle has arisen due to complications involving the cryptocurrency exchange Gemini and DCG. It concerns the Gemini Earn program, which Genesis partially funded.
Following FTX’s collapse, Genesis suspended withdrawals in November 2022, citing “unprecedented market turmoil.” The company subsequently filed for bankruptcy in January 2023.
Gemini Trust’s Billion-Dollar Claim
According to documents filed with the court by Gemini, Genesis had outstanding debts exceeding $3.5 billion to its top 50 creditors at the time of its Chapter 11 filing.
Gemini filed a claim in May seeking to recover over $1.1 billion in assets on behalf of approximately 232,000 Earn users. They initiated a lawsuit against DCG and CEO Barry Silbert in June, alleging fraud.
Gemini co-founder Cameron Winklevoss alleged in July, “Barry was not only the architect and mastermind of the DCG and Genesis fraud against creditors, but he was also directly and personally involved in perpetrating it.”
1/ Today, @Gemini filed a lawsuit against @DCGco and @BarrySilbert personally in New York court. Barry was not only the architect and mastermind of the DCG and Genesis fraud against creditors, he was directly and personally involved in perpetrating it.
— Cameron Winklevoss (@cameron) July 7, 2023
Additionally, in January, the U.S. Securities and Exchange Commission initiated a civil suit against Gemini and Genesis.
The suit alleged that unregistered securities were sold through the Earn program. Although both companies requested a dismissal of the case in May, as of now, it remains unresolved.