Are accusations of ‘gaslighting’ by the Gemini legal team against the Digital Currency Group (DCG) justified? This is the question that has been circulating in the financial world. According to recent legal documents filed on September 15 in the United States Bankruptcy Court for the Southern District of New York, Gemini’s lawyers are of the opinion that DCG is misleading Genesis creditors with “contrived, misleading, and inaccurate assertions” in their proposed recovery plan.
Details of the Accusations
The legal team representing Gemini Trust has called into question a plan put forth by DCG for the creditors of Genesis Global. The plan, submitted to the bankruptcy court on September 13, suggests that unsecured creditors could expect a recovery of 70–90% of their claims, with a significant portion in digital currencies. Furthermore, users of Gemini Earn could anticipate an approximately 95–110% recovery.
However, Gemini’s lawyers have argued that DCG’s proposal is nothing more than an attempt to “bait the Gemini Lenders into accepting a deal” that would enable DCG to pay less than it allegedly owes. The legal team urged DCG to enhance the loan terms offered to Genesis and not to exploit Genesis’ bankruptcy proceedings as a cover for justifications in the recovery plan.
Genesis’ Financial Struggles
The legal skirmish revolves around the Gemini Earn program, funded in part by Genesis. Genesis suspended withdrawals in November 2022 following FTX’s collapse, attributing it to “unprecedented market turmoil”. The company filed for bankruptcy in January 2023. Gemini, in its court filings, stated that Genesis owed over $3.5 billion to its top 50 creditors at the time of its Chapter 11 filing.
In May, the crypto exchange submitted a claim to recover more than $1.1 billion in assets for approximately 232,000 Earn users. Furthermore, a lawsuit was launched against DCG and CEO Barry Silbert in June, alleging fraud. According to Gemini co-founder Cameron Winklevoss, Barry was directly involved in the purported fraud against creditors.
Legal Implications and the Role of SEC
In January, the U.S. Securities and Exchange Commission (SEC) initiated a civil suit against Gemini and Genesis for allegedly selling unregistered securities through the Earn program. The two firms filed a motion to dismiss the case in May, but it remains unresolved at the time of publication.
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