Lawyers representing Gemini Trust are objecting to a plan proposed by Digital Currency Group (DCG) for creditors of Genesis Global.
In a Sept. 15 filing with the U.S. Bankruptcy Court for the Southern District of New York, the legal team accused DCG of manipulating Genesis creditors through “artificial, misleading and inaccurate assertions” in the recovery plan. The plan, filed in bankruptcy court on September 13, claims that unsecured creditors can expect a “70-90% recovery rate, with a large portion being recovery rates for digital currency,” and that the expected recovery rate for Gemini Earn users could be “approximately 95-110%” of their claims are recovered.
According to the legal team, DCG attempted to “induce Gemini Lenders into accepting a deal” that would have seen the company pay less than it was allegedly owed. Lawyers called on the company to “significantly improve the terms of its loans to Genesis” and not use Genesis’ bankruptcy proceedings as justification for a recovery plan.
“In an effort to distract Genesis creditors from the inconvenient facts of its apparently inadequate and unfair proposal, the proposed recovery rates touted by DCG are a complete mirage — and at best misleading,” the Sept. 15 filing said. Deceptive at worst.” “Make no mistake: Gemini Lenders will not actually receive any real value close to the recovery rates proposed under the current ‘Agreement in Principle’.”
The legal battle involves a tangle with cryptocurrency exchanges Gemini and DCG over the Gemini Earn program, which was partially funded by Genesis. After FTX collapsed, Genesis stopped withdrawals in November 2022, citing “unprecedented market volatility” at the time, and filed for bankruptcy in January 2023.
related: DCG reached an “agreement in principle” with Genesis creditors and debtors
Genesis owed its top 50 creditors more than $3.5 billion when it filed for Chapter 11 of the U.S. Bankruptcy Code, according to Gemini court filings. The cryptocurrency exchange filed a claim in May seeking to recover more than $1.1 billion in assets for approximately 232,000 Earn users, and filed a lawsuit against DCG and its CEO Barry Silbert in June, alleging fraud.
“Barry was not only the architect and mastermind of DCG and Genesis’s fraud against creditors, but he was personally and directly involved in that conduct.” explain Gemini co-founder Cameron Winklevoss June.
The U.S. Securities and Exchange Commission filed a civil lawsuit against Gemini and Genesis in January for allegedly selling unregistered securities through the Earn program. The companies filed a motion to dismiss the case in May, but that motion was still pending at the time of publication.
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