Crypto news: Genesis’ debt to Gemini

News: crypto exchange platform Gemini (connected to Genesis) and its founders, Tyler and Cameron Winklevoss, are being sued by investors who claim the cryptocurrency exchange sold interest-bearing accounts it failed to register as securities.

The investors accused the company and its founders of fraud and Exchange Act violations in a proposed class action filed Tuesday in federal court in New York. The class action was filed by investors Brendan Picha and Max J.Hastings; according to the complaint filed, the goal is to reach a jury trial. 

Crypto news: Genesis’ liquidity crisis caused Gemini’s Earn program to be halted

Initially, Gemini Trust Earn products attracted investors by offering them up to 8% interest on their assets. In the investment program, Gemini partnered with accredited third-party borrowers to provide yield, generated through interest payments on loaned assets.

However, after the collapse of FTX, the Winklevoss twins abruptly stopped making repayments after borrower partner Genesis Global fell victim to the collapse of Sam Bankman Fried‘s platform. 

The investors’ allegations assume that the Gemini exchange refused to honor further investor repayments, effectively wiping out all investors who still had holdings in the program. 

“When Genesis encountered financial distress as a result of a series of collapses in the crypto market in 2022, including FTX Trading Ltd. (“FTX”), Genesis was unable to return the crypto assets it borrowed from Gemini Earn investors.”

The exchange owned by the Winklevoss brothers said it is working with Genesis and DCG and operating as a matter of urgency to resolve the liquidity issues and compensate the still-locked holdings. On 23 December, the Winklevosses reassured that each party remains committed and cooperative. 

In fact, during the vacations, according to their statements, they never stopped working to reach a solution; there will be updates soon. 

Genesis’ huge debt to Gemini

Genesis apparently owes a debt to Gemini customers, which amounts to about $900 million. Crypto exchange Genesis, along with its subsidiary Digital Currency Group (DCG), are looking for ways to recover this large sum of money.

According to a recent article in the Financial Times, the Winklevoss twins (made famous by the lawsuit against Mark Zuckerberg and Facebook), now owners of the Gemini crypto exchange, are having major problems related to the funds invested on Genesis. Genesis’ company is among those hardest hit by the collapse of FTX. 

Barry Silbert, founder of Digital Currency Group (DCG), recently addressed shareholders with a letter revealing the large debt Genesis has with the exchange platform.  

In addition to the previously reported group of Gemini clients with $900 million, there are two other groups of Genesis creditors represented by lawyers. The amount of loans we are talking about is much larger than the debt that affects only Gemini. 

According to verified sources, the Genesis creditor group is more than one, and the loan sum is equivalent to about $1.8 billion. With an expectation that this sum will grow larger and larger. 

“We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”

Genesis executives continue to deny all rumors that their company is on the road to bankruptcy. Genesis continues to reassure that their operations remain operational, despite the fact that withdrawals have been stopped in the lending business. 

The Winklevoss twins, on the other hand, go out on a limb to talk about their connection with Genesis and their willingness to redeem Gemini Earn funds: 

“We continue to work with Genesis Global Capital, LLC (Genesis) — the lending partner of Earn — and its parent company Digital Currency Group, Inc. (DCG) to find a solution for Earn users to redeem their funds. This remains our highest priority and we understand Genesis and DCG remain committed to exploring every possible option to fulfill their obligations to Earn users.”

The situation is becoming increasingly conflicting, on the one hand Genesis with its huge debt to various creditors including Gemini of the Winklevoss twins. 

On another side is the exchange platform Gemini, which is seeing the onslaught of its investors, eager for compensation, ready for a class action against the exchange’s owners.

Many issues are actually united by one common thread, leading to a financial crisis between Genesis and Gemini, triggering a series of disastrous events: the fall of Sam Bankman Fried‘s empire.