Key Takeaways
- Gemini accused DCG of gaslighting Genesis creditors through “contrived, misleading, and inaccurate assertions” in the bankruptcy plan.
- Lawyers allege that DCG was attempting to “bait the Gemini Lenders into accepting a deal”
In a significant legal dispute within the cryptocurrency space, lawyers representing Gemini Trust have strongly opposed a bankruptcy recovery plan proposed by Digital Currency Group (DCG) concerning creditors of Genesis Global. Gemini Trust, a well-known cryptocurrency exchange, has raised serious concerns about the proposed plan, labeling it as “misleading at best.”
The ongoing issue revolves around Genesis Global, which had partnered with Gemini on a lending program that has remained frozen for several months. Earlier this week, Genesis and its parent company, Digital Currency Group (DCG), announced a proposed remuneration plan for more than 230,000 retail creditors who had used Gemini’s Earn program. This plan aimed to make these creditors “nearly whole” and was scheduled for a vote later this year. It’s worth noting that Genesis and CoinDesk are both owned by DCG.
However, Gemini Trust has now come forward, stating that the proposed recovery plan falls short of delivering the true value of the funds owed to Gemini Earn users. Gemini’s lawyers expressed their skepticism, asserting that DCG’s proposed recovery rates were deceptive and the plan did not come close to the actual cash and digital assets owed by Genesis to Gemini Lenders.
According to Gemini’s legal team, the proposed plan would offer Gemini Lenders a fractional share of interest and principal payments over seven years from a risky counterparty, which they argued was far from being equivalent to receiving the owed cash and digital assets promptly.
Gemini’s lawyers also raised broader concerns about DCG’s tactics, accusing the company of attempting to “wear down” Genesis’ creditors in the hopes of forcing them to accept a significant reduction in their claims.
In a filing made on September 15 in the United States Bankruptcy Court for the Southern District of New York, Gemini’s legal team accused DCG of using “contrived, misleading, and inaccurate assertions” in the recovery plan, effectively gaslighting Genesis creditors.
The recovery plan, submitted on September 13, claimed that unsecured creditors could expect a “70–90% recovery with a meaningful portion of the recovery in digital currencies,” while Gemini Earn users could anticipate an “approximately 95–110%” recovery for their claims.
Gemini’s lawyers alleged that DCG was trying to entice Gemini Lenders into accepting a deal that would allow the company to pay less than what it truly owed. They called on DCG to substantially improve the terms of the loans provided to Genesis and not exploit the bankruptcy proceedings as a cover for justifying the terms of the recovery plan.
This legal battle revolves around a complex web of financial entanglements involving cryptocurrency exchanges Gemini, DCG, and Genesis Global. Genesis halted withdrawals in November 2022 following the collapse of FTX, citing “unprecedented market turmoil” at the time, and subsequently filed for bankruptcy in January 2023.
