Lawyers representing Gemini Trust have raised objections to a proposed plan put forth by Digital Currency Group (DCG) for creditors of Genesis Global. In a filing made on September 15 in the US Bankruptcy Court for the Southern District of New York, Gemini's legal team accused DCG of attempting to manipulate Genesis creditors through misleading and inaccurate assertions in the recovery plan.
DCG's plan, filed on September 13, suggests that unsecured creditors could anticipate a recovery rate of "70-90%, a significant portion of which would be in digital currency," while Gemini Earn users might see a recovery rate of "approximately 95- 110%" of their claims. Gemini's lawyers assert that DCG's intentions were to induce Gemini Lenders to accept a deal that would pay them less than they were allegedly owed. They called upon DCG to improve the terms of its loans to Genesis and urged against the use of Genesis' bankruptcy proceedings as a justification for the recovery plan.
In the filing, it was stated that "the proposed recovery rates touted by DCG are a complete mirage — and at best misleading, deceptive at worst." Gemini's legal team believes that Gemini lenders will not receive anything close to the proposed recovery rates under the current agreement.
The legal dispute revolves around the cryptocurrency exchanges Gemini and DCG and their involvement with the Gemini Earn initiative, which received partial funding from Genesis. Following FTX's collapse in November 2022, Genesis halted withdrawals, citing unprecedented market volatility, and subsequently filed for bankruptcy in January 2023. At the time of filing for Chapter 11, Genesis owed over $3.5 billion to its top 50 creditors, as indicated in Gemini's court filings. Gemini initiated a claim in May seeking to recover more than $1.1 billion in assets for approximately 232,000 Earn users and filed a lawsuit against DCG and its CEO Barry Silbert in June, alleging fraud.
In June, Cameron Winklevoss, co-founder of Gemini, accused Barry Silbert of being the mastermind behind DCG and Genesis's alleged fraud against creditors, claiming that Silbert was personally and directly involved in the fraudulent activities.
Furthermore, in January, the SEC filed a civil lawsuit against Gemini and Genesis, alleging the sale of unregistered securities through the Earn program. Although the companies filed a motion to dismiss the case in May, it was still pending at the time of this report
