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Crypto exchange Gemini, which is headed by the Winklevoss brothers, is contemplating the idea of filing a lawsuit against the Digital Currency Group (DCG) and its CEO Barry Silbert.
The company will take legal action if no repayment plan is offered for the $900 million loan that Gemini had issued to Genesis Global, which has now filed for Chapter 11 bankruptcy protection.
Not long after the announcement of Genesis filing for bankruptcy, the president and co-founder of Gemini, Cameron Winklevoss had talked about the possibility of a lawsuit.
He tweeted that the bankruptcy filing of the crypto lender was a necessary step for recovering their loan because the company would now be under judicial oversight and have to provide information about what brought it to this point.
However, he also added that the bankruptcy of Genesis does not mean that Barry Silbert and DCG are no longer accountable.
A DCG subsidiary, Genesis had been the first company in the industry to roll out an over-the-counter (OTC) trading desk for Bitcoin back in 2013.
But, the company suffered from heavy losses due to the bankruptcy of crypto hedge fund Three Arrows Capital (3AC) and FTX crypto exchange, which culminated in its bankruptcy filing on late Thursday.
It had been revealed to be 3AC’s biggest creditor, as it had issued an under-collateralized loan to the hedge fund worth $2.36 billion.
Gemini, Genesis, and DCG
The Gemini crypto exchange had introduced a program by the name of Gemini Earn in partnership with Genesis.
The said program offered investors a chance of earning interest of about 7.4% on their digital asset holdings.
The first hints of trouble had begun to emerge in November 2022 when Gemini warned customers that there could be a problem with withdrawals.
The same day saw Genesis announce that it was freezing client withdrawals. On January 11th, the companies terminated the Gemini Earn program.
Gemini said that it had decided to do so for forcing Genesis to return the customer funds worth $900 million.
The US SEC had also filed charges against both Genesis and Gemini due to the Gemini Earn program, as it called it an unregistered security selling that was used for raising crypto worth billions of dollars.
Meanwhile, Gemini accused Genesis as well as its parent firm DCG of fraud and urged its CEO to resign, as there could be no progress as long as he remained at the helm.
DCG had also responded to the statement and called it a publicity stunt and said that it was taking legal action against the defamatory and malicious attacks by the crypto exchange.
Even though they continued to argue publicly, DCG had said that they would have a productive dialogue to come up with a solution for Genesis and its clients that will help all parties.
The bankruptcy filing from Genesis means that it would now be more difficult for Gemini to make a recovery and this would mean losses for its clients.