Beleaguered crypto lender Genesis is suing cryptocurrency exchange Gemini to recover over half a billion dollars in preferential transfers.
A preferential transfer is paid off by an insolvent firm to a creditor typically within 90 days before filing for bankruptcy.
If certain conditions are met, the recipient may have to return the funds so that payments to the bankrupt company’s creditors are equitably disbursed.
In a new court filing, Genesis says it is seeking to recover over $689 million in withdrawals that were made through the Gemini Earn Program during the 90-day period prior to its filing for Chapter 11 bankruptcy.
The two firms previously collaborated on the Earn investing program, which enabled retail investors to loan out their cryptocurrencies to earn interest, but Genesis defaulted.
Genesis says it is seeking to recover the amount withdrawn such that these benefited Gemini at the expense of other creditors.
“During the ninety (90) day period prior to the commencement of Plaintiff’s Chapter 11 Case, Defendants withdrew an aggregate gross amount of no less than approximately $689,302,000 from Plaintiff. As a result of these withdrawals, Defendants benefitted at the expense of Plaintiff’s other creditors, and continue to benefit to this day through their retention of the property Plaintiff seeks to avoid and recover here.”
Genesis is demanding the return of the funds as it faces a lawsuit from Gemini for failing to return the shares in a Bitcoin (BTC) trust that were pledged as collateral for the Earn loans.
In July, Gemini co-founder Cameron Winklevoss said that the crypto exchange filed a lawsuit against Genesis parent company Digital Currency Group (DCG) and its CEO Barry Silbert for allegedly masterminding a fraud scheme against creditors.
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