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Crypto Lender Genesis Sues Gemini to Recover $689M in Customer Assets

Genesis Global is suing Gemini Trust for the $689 million withdrawn by 230,000 users 90 days before it filed for bankruptcy

Photo by Romain Dancre / Unsplash

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Genesis Global is suing Gemini Trust to recover funds withdrawn by customers in the bank run that led to Genesis's bankruptcy.

In the lawsuit, Genesis claimed up to 230,000 users under the "Earn investing program" withdrew $689 million from its platform in 90 days before it filed for bankruptcy.

It is also argued that US bankruptcy laws allow for the clawback of withdrawals to enable fair distribution among creditors.

Genesis borrowed assets from Earn customers and re-invested the funds to pay interest to customers. Gemini served as the custodian that processed deposits and withdrawals, earning a cut from payments by Genesis to Earn users.

Gemini believes Genesis should repay customers instead of seeking funds from those who withdraw.

"This attack on Earn Users is a new low, even for Genesis," Gemini said in a statement.

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Last month, Gemini filed a lawsuit against Genesis, seeking control of over 60 million shares of the Grayscale Bitcoin Trust (GBTC). The shares were pledged as collateral for the Gemini Earn product and to satisfy the claims of Earn customers who had their funds locked when Genesis froze withdrawals.

"Genesis has repeatedly taken actions to harm Earn users and to hinder and delay Earn users’ recovery of their digital assets," the lawsuit alleged.