Gemini Trust Co. filed suit against troubled digital asset lender Genesis Global Capital on Oct. 27, seeking to recover $1.6 billion in collateral for Gemini customers trapped when Genesis halted withdrawals in November.

The lawsuit filed in bankruptcy court alleges Genesis improperly withheld collateral that was supposed to backstop loans Gemini users made through the exchange’s Earn program.

The collateral pledged under the security agreement consists of more than 30 million shares of the Grayscale Bitcoin Trust (GBTC), which were kept in an account held by Gemini for the benefit of the lenders participating in its Earn program.

This GBTC collateral was intended to secure Genesis’s obligations and liabilities under the master loan agreements governing the Earn loans. Gemini claims Genesis has prevented it from distributing the collateral proceeds to more than 230,000 Earn users.

The dispute stems from a summer meltdown in crypto markets that forced Genesis and other major lending platforms to freeze withdrawals. Genesis, which owes creditors over $3 billion, has disputed Gemini’s claim on the collateral shares.

Thursday’s lawsuit intensifies a high-stakes battle over how losses get distributed across Genesis creditors, the vast majority of whom are Gemini customers. The outcome could s

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Author: Jacob Oliver

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