Cryptocurrency exchange Gemini filed an adversary proceeding against bankrupt crypto lender Genesis Global Holdco in the Southern District of New York Bankruptcy Court on Oct. 27. At issue is the fate of 62,086,586 shares of Grayscale Bitcoin Trust (GBTC). They were used as collateral to secure loans made by 232,000 Gemini users to Genesis through the Gemini Earn Program. That collateral is currently worth close to $1.6 billion.
According to the suit, Gemini has received $284.3 million from foreclosing on the collateral for the benefit of Earn users, but Genesis has disputed the action, preventing Gemini from distributing the proceeds.
Genesis has also proposed using the initial value of the collateral, which was more than $800 million, to determine the Earn Users’ deficiency claim rather than the foreclosure value. As the foreclosure value was greater than the initial value, Genesis would thus free up hundreds of millions of dollars for distribution to other creditors:
“But it was Gemini who bore the market risk related to the Initial Collateral for the benefit of Earn Users following the foreclosure; so it follows that only Earn Users are entitled to any gain resulting from Gemini taking on that…
