American cryptocurrency exchange, Gemini Trust Co. has filed a complaint against bankrupt crypto lender Genesis Global Holdco LLC over the ownership of nearly $1.6 billion worth of shares in the Grayscale Bitcoin Trust.
The dispute revolves around 62 million shares of the Grayscale Bitcoin Trust (GBTC), which were used as security for loans given by 232,000 Gemini users to Genesis through the Gemini Earn Program.
Gemini collected $284.3 million by seizing the collateral and intends to distribute it to the users who participated in the Gemini Earn Program.
However, Genesis has contested this action, which has prevented Gemini for past 12 months from distributing the funds to the program’s participants.
Gemini is seeking a court ruling that Genesis doesn’t have the right to these GBTC shares pledged as collateral to Gemini’s Earn product users. Gemini wants to ensure that these shares, mostly still held by Genesis, aren’t used to repay other Genesis creditors.
This lawsuit follows Genesis’ decision to abandon a proposed settlement with its parent company, Digital Currency Group. The settlement was part of a debt-repayment plan that could have benefited Genesis creditors.
Gemini aims to clarify its claims against Genesis and eventually use the GBTC shares to reimburse its users. The goal is to resolve these issues for the benefit of both companies and their users.
In the lawsuit, it is stated that 99% of the creditors who use Gemini Earn are Genesis creditors. These Genesis creditors hold claims that makeup 28% of the total claims in terms of their financial value.
This legal battle highlights the complexities and challenges in the crypto industry, underscoring the need for clear regulations and dispute resolution mechanisms.