Genesis-Gemini Legal Showdown Heats Up

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  • According to the regulatory body, Genesis and Gemini had unlawfully offered and sold securities to retail investors through the Gemini Earn crypto asset lending program.
  • The crypto leader has officially filed a lawsuit against Gemini crypto exchange to recover $689 million in preferential transfers as of Nov. 21.
  • From the lawsuit alone, over 230,000 investors have suffered, and, unfortunately, the court proceedings show no signs of compensation.

One of the main highlights of the 2023 crypto market is the sheer volume of crypto lawsuits. Since the FTX crash, regulatory bodies have doubled their effort to tighten regulatory restrictions, surprising digital assets providers. In a year, many crypto-based organizations have either shut down their operations or been forced to adhere to constrictive regulatory requirements.

Initially, the crypto lawsuits made sense since, through the misconduct of a single individual, a trillion-dollar franchise came to its knees. To ensure a way forward, regulatory bodies had to come up with new ways to ensure integrity, transparency, and accountability are maintained when dealing with digital currency. However, even after the FTX case came to a close, its after-effects are still plaguing the industry.

In recent developments, the bankrupt crypto lender intends to regain its reputation and justice for its former fiasco. Genesis Global Capital has officially sued Gemini crypto exchange to recover more than $689 million, according to a court filing on Nov. 21.

Genesis uses Gemini to recover $689 million.

Many crypto traders and enthusiasts believe that the FTX crash caused the 2023 crypto winter, but in reality, a series of events played a crucial role in bringing the industry close to its knees. Unfortunately, close associates of the former crypto titan inevitably got dragged into the whole mess, eventually suffering from a liquidity crisis after mass withdrawals. Genesis, a former prominent crypto leader, and Gemini crypto exchange were among the most affected.

The US SEC had prior grievances with both organizations, and the FTX crash proved their suspicions. According to the regulatory body, Genesis and Gemini had unlawfully offered and sold securities to retail investors through the Gemini Earn crypto asset lending program. Through this unregistered offering, both corporates raised billions of dollars worth of crypto assets from thousands of investors.

Genesis-Gemini
The Genesis-Gemini dispute has shed light on the dangers of centralized exchanges and their role in the crypto market.[Photo/Coincu]
Unfortunately, in 2022, Genesis experienced a liquidity crisis and halted its withdrawal features, raising numerous eyebrows. At the time, Genesis held at least $900 million in investor assets from 340,00 Gemini Eaarn investors. Unfortunately, the crisis worsened as Gemini terminated its program without fully compensating the investors.

In response to the whole crisis, Genesis has revealed that its partner company holds much more responsibility than we initially thought.

Also, Read FTX, Genesis reached a settlement agreement to resolve the bankruptcy case.

The crypto leader has officially filed a lawsuit against Gemini crypto exchange to recover $689 million in preferential transfers as of Nov. 21.

According to the lawsuits, during the 90 days before Genesis filed for bankruptcy, the crypto exchange withdrew an “aggregate gross amount of no less than approximately $689,302,000.” Unfortunately, this transaction was at the expense of other creditors that continued to benefit the crypto exchange. In addition, the funds represented the property the crypto lender desperately required to compensate the affected investors.

Genesis requested the court to implement the United States Bankruptcy Code to correct the “unfairness and return Defendants to the same position as Plaintiff’s other similarly-situated creditors.” The crypto lender highlighted that Gemini utilized the chaos LUNA and TerraUSD caused to withdraw the funds in hopes of going unnoticed. In addition, Gemini had instituted that the repayment of previous loans be extended to Genesis despite the court deeming the transfers avoidable. 

Signs of another “Rumbling”

In the past months, the crypto market has faced several issues from the same organizations that caused the 2022 crypto crash. Throughout the year, crypto lawsuits have tripled, with the US sec flagging any exchange that exhibits peculiar transaction rates.

Initially in January, at the beginning of the Genesis-Gemini case, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said, “The recent collapse of crypto asset lending programs and the suspension of Genesis’ program underscore the critical need for platforms offering securities to retail investors to comply with the federal securities laws. As we’ve seen time and again, the failure to do so denies investors the basic information they need to make informed investment decisions. Our investigations in this space are very much active and ongoing and we encourage anyone with information about this matter or other possible securities law violations to come forward, including under our Whistleblower Program if applicable.

Unfortunately, as more cases erupt, the population of centralized crypto exchanges only worsens. In recent developments, Binance revealed a shocking revelation as CZ pleaded guilty to his charges. This not only sets back the good initiatives the market has struggled to attain but also clarifies the fears of regulatory bodies. If nothing is done, the entire industry will face a similar decline in digital assets as in 2022.

The Geniss-Gemini dispute only clarifies that custodial exchanges are staining one of the core principles of blockchain technology: transparency. Placing a centralized entity has given scammers and exchanges leeway to conduct shady businesses underneath our noses. From the lawsuit alone, over 230,000 investors have suffered, and, unfortunately, the court proceedings show no signs of compensation.

Is this truly the vision Web3 has? A web of lies, false accusations, and money laundering activities? Or is the true nature of centralized exchanges finally showing?

Also, Read Genesis joins the list of bankrupt crypto companies.

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Ken Mutuku
Ken Mutuku
I am an enthusiastic writer who believes that facts, knowledge and opinions can be expressed vividly with just a few words. I think that all forms of writing achieve this; hence I have a wide area of expertise and interest, such as cryptocurrency, psychology and the human mind.