New York-based cryptocurrency exchange Gemini has officially initiated legal action against Digital Currency Group’s (DCG) Genesis Global in the Southern District of New York Bankruptcy Court, Zycrypto reported. According to a statement by the exchange, the lawsuit seeks to recover $1.6 billion in value from Gemini, allegedly owed to earn users who have been caught in the middle of the bitter dispute. The saga began in the summer of 2022, when Gemini insisted that Genesis provide security for all loans taken by 232,000 earn users. Genesis subsequently pledged 62 million shares of Grayscale Bitcoin Trust as collateral to secure these loans. These shares, valued at almost $1.6 billion today, were meant to satisfy the claims of every earn user fully. However, Gemini has claimed that it only received $284.3 million from foreclosing on the collateral for the benefit of earn users, a statement that Genesis had previously disputed. Gemini further argued that Genesis has refused to remit the rest of the amounts, including a second tranche of collateral worth more than $800 million. As per the exchange, this collateral also belongs to earn users, as stipulated in an amendment to the security agreement. The exchange further argued that this stubbornness on Genesis’s part is an attempt to deny earn users access to millions in post-foreclosure appreciation. The filing called for the bankruptcy court’s confirmation of the legitimacy of Gemini’s foreclosure on the initial collateral and the recognition of earn users’ rights to the additional collateral. It also sought to halt Genesis’s proposed reorganization plan, thus threatening to divert value from earn users to other creditors.
