Gemini Alleges DCG’s Recovery Plan is Misleading; Are Creditors at Risk?

In an escalating legal feud between Gemini Trust and Digital Currency Group (DCG), Gemini Trust’s legal team has raised significant concerns about DCG’s proposed recovery plan for Genesis Global creditors. The dispute unfolds in the United States Bankruptcy Court for the Southern District of New York.

So, why is DCG’s larger-than-life recovery proposal under fire? Are we about to watch another court drama play out? Let’s explore.

Gemini’s Loophole Discovery

What is more concerning is that Gemini’s legal team has found a loophole in the DCG’s recovery plan. Based on their theory DCG has given a malicious plan “contrived, misleading, and inaccurate assertions”. Whereas, DCG’s proposal suggested that unsecured creditors could potentially recover between 70% to 90% of their claims, with a substantial portion in digital currencies. For Gemini Earn users, the recovery estimate ranged from approximately 95% to 110% of their claims. 

However, Gemini Trust’s legal team dismisses these figures as a “total mirage,” alleging that DCG is attempting to convince creditors to accept a deal that would ultimately pay them less than the amounts they are owed. Their argument insists that DCG must “significantly improve the terms of the loans” offered to Genesis and refrain from using the bankruptcy proceedings as cover for justifying the recovery plan.

Also Read: DCG’s Deal with Genesis Could Recover 90% of Creditor Funds

The Genesis, DCG, and Gemini Entanglement

The ongoing legal battle centers on the involvement of cryptocurrency exchange Gemini with Genesis and DCG in the Gemini Earn program. Genesis suspended withdrawals in November 2022 due to market turmoil caused by the FTX collapse, eventually filing for bankruptcy in January 2023. Gemini responded by filing a claim, aiming to recover assets for approximately 232,000 Earn users, and initiating a lawsuit against DCG and its CEO, Barry Silbert, alleging fraud.

Cameron Winklevoss, co-founder of Gemini, directly accused Barry Silbert of masterminding fraudulent activities involving DCG and Genesis against creditors. Gemini Trust contends that DCG’s tactics have hindered fund distribution to Gemini Lenders, despite a $100 million offer for a swift resolution from the founders, further complicating the situation. On the other side of the coin, in January, the SEC filed a civil suit against Gemini and Genesis, alleging the sale of unregistered securities. Although a motion to dismiss was filed in May, the case remains ongoing.

Also Read: Gemini Vs Genesis: Winklevoss Pens Explosive Letter, Sets Ultimatum for $1.2 Bn Battle

Gemini Responded DCG Deliberately Delayed the Process

Cameron Winklevoss, co-founder of Gemini, accused Barry Silbert of being the mastermind behind fraudulent activities involving DCG and Genesis against creditors. Gemini Trust argues that DCG’s tactics have impeded fund distribution to Gemini Lenders, despite a $100 million offer for a quick resolution from the founders, further complicating the situation. On the flip side, in January, the SEC filed a civil suit against Gemini and Genesis, alleging the sale of unregistered securities. Although a motion to dismiss was filed in May, the case remains ongoing. 

DCG’s Proposal

DCG’s surprising proposal includes the renegotiation of a $630 million loan between Genesis and DCG, potentially streamlining the process. While a portion of this loan may be repaid in cash upon transaction closure, the remainder could be structured as a two-year note. The next pivotal step involves a vote by DCG’s creditors, which will ultimately determine the plan’s fate.

The crypto community eagerly awaits the resolution of this intricate legal battle.