Genesis Global on Wednesday won a court ruling confirming its ownership of 31.2 million shares of Grayscale Bitcoin Trust, a windfall for the bankrupt cryptocurrency lender’s creditors, WSJ Pro Bankruptcy reported. Crypto exchange Gemini Trust in October sued Genesis, its former business partner, over the shares, saying they were pledged as collateral on loans to Genesis from customers in Gemini’s Earn investment program. The shares are now worth more than $1.2 billion as the price of bitcoin, the fund’s underlying asset, has more than doubled since Genesis filed for bankruptcy. In August 2022, Genesis offered Gemini about 30.9 million shares of Grayscale Bitcoin Trust to secure $1.2 billion in loans from Gemini Earn users. Three months later, as the industry’s troubles deepened following the collapse of crypto exchange FTX, Genesis Global agreed to offer an additional 31.2 million shares as collateral. But those shares in dispute were never transferred to Gemini or Earn users. Judge Sean Lane with the U.S. Bankruptcy Court in White Plains, N.Y., said in his written decision Wednesday that the Grayscale shares held in bankruptcy belong to Genesis because they were never transferred and dismissed Gemini Trust’s assertion to claim ownership of the shares.
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In related news, Genesis Global Holdco LLC has settled a lawsuit brought by New York’s top law enforcement official alleging the bankrupt crypto lender defrauded customers of its now-terminated Gemini Earn program, which was run jointly with Gemini Trust Co., Bloomberg News reported. The settlement with New York Attorney General Letitia James is structured so that assets that could have otherwise gone to state authorities will instead be returned to former Earn customers and other Genesis creditors. The deal must be approved by a bankruptcy judge and follows a settlement Genesis struck resolving a separate complaint over the Earn program brought by the US Securities and Exchange Commission. James sued Genesis, its parent company Digital Currency Group and Gemini last October, accusing the crypto firms of defrauding customers of $1.1 billion. The settlement disclosed Thursday in New York bankruptcy court only resolves allegations against Genesis, according to court documents. The companies have denied wrongdoing and Genesis is settling the allegations without admitting liability. Genesis, which intends to liquidate, also agreed it will no longer do business in New York.
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