Media: Gemini pulled $282 million from Genesis Global Capital before the platform’s bankruptcy

The Gemini exchange pulled $282 million from Genesis Global Capital over several months before the platform announced bankruptcy. According to Bloomberg, citing sources familiar with the matter.

The Winklevoss brothers’ firm is pursuing, through the courts, the return of $1.1 billion. The debt was owed to Gemini’s clients under the Earn program, which allowed users of the exchange to earn yields on assets borrowed on the platform.

The $282 million mentioned became a reserve to satisfy customer claims.

On November 16, 2022, Genesis Global Capital froze withdrawals and the issuance of new loans. The firm cited “heightened requests” from clients after the collapse of FTX.

The source of difficulties was the collapse of the hedge fund 3AC in July of the same year. The latter did not fulfill its obligations to Genesis Global Capital on $2.36 billion. Support for the firm came from its parent DCG.

In January 2023, Genesis Global Holdco and its subsidiaries Genesis Asia Pacific and Genesis Global Capital filed for bankruptcy. According to media reports, their liabilities exceed $3 billion. This amount includes claims by Gemini exchange’s clients totaling $900 million.

In May, DCG agreed to launch a 30-day pre-trial mediation process.

The parties sought to reach a workable resolution to the Genesis creditors agreement proposed in February 2023, under which creditors could recover 80% of the lost funds. The arrangements envisaged a gradual write-off of the platform’s loan portfolio and the sale of insolvent entities.

In May, DCG skipped a payout of $630 million to the Bitcoin exchange.

In July, Gemini filed a suit, seeking immediate return of $1.1 billion for 232,000 affected Earn users. Digital Currency Group urged its dismissal. This was followed by an ultimatum from the Winklevoss brothers, who sought a payout of $1.46 billion.

In August, DCG promised to reimburse Genesis creditors 70% to 90% of funds. However the latter called the proposal “unsatisfactory” and threatened to block any final bankruptcy deal on such terms.

In September, Genesis filed a lawsuit against DCG over unpaid loans of $600 million.