In the ongoing battle between cryptocurrency exchange Gemini and venture capital firm Digital Currency Group (DCG), the latest chapter takes a contentious turn. Gemini has accused DCG of employing deceptive tactics in their attempts to settle the debts of Genesis, a crypto lending unit that filed for bankruptcy earlier this year.
Genesis left a significant financial burden in its wake, owing approximately $735 million worth of assets to users of Gemini Earn. This program allowed users to lend their cryptocurrencies and earn interest, making it a popular feature among Gemini’s clientele. However, the abrupt bankruptcy of Genesis threw the entire system into turmoil, leaving many users anxious about their funds.
In response to this financial catastrophe, Gemini filed a lawsuit against DCG in July, alleging that the parent company was responsible for the mismanagement and subsequent bankruptcy of Genesis. The lawsuit sought to hold DCG accountable for the debt and ensure that Gemini Earn users received their fair share of the remaining assets.
On September 13th, DCG proposed a settlement agreement that offered hope to unsecured creditors, including those affected by the Genesis collapse. According to DCG’s statement, the proposed agreement could potentially provide unsecured creditors with a recovery rate ranging from 70% to 90% of their losses, with a significant portion of this recovery coming in the form of digital currencies. Notably, it claimed that Gemini Earn users could recover as much as 95% to 110% of their claims.
However, Gemini was quick to dispute these claims in a new court filing on a recent Wednesday. The exchange’s response labeled DCG’s proposed recovery rates as “misleading at best and deceptive at worst.” Gemini expressed skepticism regarding the likelihood of creditors, especially Gemini Earn users, receiving the stated recovery rates in reality.
Gemini further asserted that DCG’s proposal was designed to shortchange Gemini lenders by allowing the firm to pay less than what it truly owed. They accused DCG of continuing a pattern of “contrived, misleading, and inaccurate assertions” to avoid taking responsibility for the harm caused to creditors, particularly the Gemini lenders.
In their statement, Gemini argued that receiving a fractional share of interest and principal payments over a period of seven years, from a counterparty that had already demonstrated its willingness to default on obligations and bankrupt a subsidiary, fell far short of receiving the actual cash and digital assets owed to Gemini lenders today by Genesis.
As this legal battle rages on, it remains a crucial and closely-watched case within the cryptocurrency industry. The outcome will not only impact the fate of the Gemini Earn users but also set a precedent for addressing financial disputes and responsibilities in the ever-evolving world of digital assets.