Gemini’s Massive $280 Million Withdrawal Preceding Genesis Bankruptcy
Tyler and Cameron Winklevoss’ Gemini exchange reportedly withdrew around $280 million from Genesis Global months before the crypto lender froze customer deposits and declared bankruptcy.
Collaborative “Earn” Program
Both Genesis and Gemini had offered an “Earn” program enabling customers to earn interest on their cryptocurrency holdings. In August 2022, Gemini initiated a significant withdrawal from Genesis to create a reserve for immediate redemptions within the Gemini Earn program. None of the withdrawn funds were directed to the Winklevoss twins.
In January, Genesis Global filed for Chapter 11 bankruptcy protection, and later, Gemini filed a $1.1 billion claim on behalf of its Earn program users.
Failed Settlement Negotiations
Despite negotiations involving Gemini, Genesis, and parent company Digital Currency Group (DCG), no final settlement agreement was reached. Gemini proceeded to sue DCG for fraud in July, while Genesis also filed a lawsuit against DCG in September, seeking over $620 million in unpaid loans.
Furthermore, both companies faced charges from the U.S. Securities and Exchange Commission (SEC) in January related to the unregistered sale of securities through the Earn program.
What is the current status of Genesis after filing for bankruptcy?
Genesis Global Holdco, LLC and its subsidiaries filed for Chapter 11 bankruptcy protection in January 2023. The company owed over $3.5 billion to its top 50 creditors, including Gemini, trading giant Cumberland, Mirana, MoonAlpha Finance, and VanEck’s New. However, Genesis has reached an in-principle agreement with its creditors to resolve claims brought up in its bankruptcy. The agreement could result in the recoveries of 70%-90% in USD equivalent for unsecured creditors and 65%-90% recovery on an in-kind basis depending on the denomination of the digital asset.
The estimated recoveries are subject to market pricing and definitive documentation. The agreement in principle will be documented and submitted to the Bankruptcy Court for final approval in connection with confirmation of a Chapter 11 plan. Genesis has also struck a deal with FTX for a $175 million bankruptcy claim. On March 31, 2023, the Bankruptcy Court entered an order granting the relief sought in the Motion. The Sale Hearing (subject to the Court’s…).
The current status of Genesis after filing for bankruptcy is that it has reached an in-principle agreement with its creditors to resolve claims brought up in its bankruptcy, and the agreement will be documented and submitted to the Bankruptcy Court for final approval in connection with confirmation of a Chapter 11 plan.
