Winklevoss Twins’ Crypto Firm Gemini Sued for Over $689 Million in Customer Withdrawals
Cryptocurrency lender Genesis Global on Tuesday sued its partner Gemini Trust, seeking to recover more than $689 million that the companies’ clients withdrew during a “bank run” that caused Genesis to collapse and fall into bankruptcy.
In the lawsuit, Genesis says that up to 230,000 users of the two companies’ “Earn” investment program withdrew more than $500 million from the crypto lending platform in the 90 days before it filed for bankruptcy in January.
U.S. bankruptcy law allows those withdrawals to be recovered so Genesis can make a fairer redistribution among all of its creditors, according to the lawsuit, which was filed in federal bankruptcy court in New York.
Gemini said on Wednesday that Genesis should fully refund customers, rather than trying to recover funds from users who made withdrawals.
“This attack on Earn Users is a new low, even for Genesis,” Gemini said in a statement.
Under the companies’ operating agreements, Genesis borrowed crypto assets from Earn clients, reinvested the assets and paid interest to the clients. Gemini acted as a custodian, processing deposits and withdrawals and taking a portion of Genesis users’ payments to Earn.
Genesis has faced external scrutiny from U.S. securities regulators and internal divisions among participants in the “Earn” program since filing for bankruptcy.
Genesis is moving forward with a bankruptcy liquidation that would return some cryptocurrency to customers without fully resolving those competing legal claims.
The Securities and Exchange Commission sued Genesis, its parent company Digital Currency Group, and Gemini in January. New York Attorney General Letitia James filed a lawsuit in October alleging that the three companies defrauded investors of more than a billion dollars.
Gemini, run by the Winklevoss twins best known for their legal battle against Meta Platforms CEO Mark Zuckerberg, had previously sued DCG over the companies’ failed crypto lending partnership and sued Genesis for failing to return shares of a bitcoin trust he had promised. as collateral for Gemini Earn loans.
Genesis has also sued DCG for more than $600 million in unpaid loans made to the parent company.
Genesis Global filed for bankruptcy in January after the collapse of key counterparties, including FTX, caused it to freeze customer refunds in November 2022.
