Crypto exchange Gemini has initiated a lawsuit against digital asset lender Genesis in an attempt to gain control over $1.6 billion worth of Grayscale Bitcoin Trust shares.
The lawsuit, filed on Friday in the U.S. Bankruptcy Court Southern District of New York, aims to recover the shares to repay clients of Gemini’s Earn program.
Gemini and Genesis have been embroiled in a dispute since last year when Genesis served as a primary lending partner for Gemini’s Earn product.
The Earn program allowed customers to earn returns on their cryptocurrency holdings. However, following the collapse of major crypto exchange FTX and the subsequent industry-wide turmoil, Genesis halted withdrawals, leaving Earn customers uncertain about the fate of their funds.
Gemini aims to retrieve the funds and fulfill its obligations to its clients.
The lawsuit highlights that the collateral, which now amounts to nearly $1.6 billion, would fully secure and satisfy the claims of all Earn users.
The main hurdle in this process, according to Gemini, is Genesis.
In a blog post addressing the lawsuit, Gemini stated that Genesis is obstructing the effort to compensate Earn users and attempting to divert the value to other creditor groups.
Genesis is a company under the umbrella of Digital Currency Group (DCG), which also controls the Grayscale Bitcoin Trust, the world’s largest Bitcoin fund.
“Genesis has repeatedly taken actions to harm Earn users and to hinder and delay Earn users’ recovery of their digital assets,” the lawsuit alleged.
“It is time to resolve these issues so that Genesis may move forward with a reasonable plan of reorganization and Gemini may distribute the proceeds of the collateral to Earn users.”
Genesis Global, a subsidiary of DCG, filed for bankruptcy in January and recently announced the cessation of all operations.
Last month, the New York Attorney General’s office sued DCG, Genesis Global Capital, and Gemini Trust, alleging that the companies defrauded customers of $1.1 billion.
Gemini Trust, founded by Cameron and Tyler Winklevoss, prominent figures in the crypto space, has accused DCG CEO Barry Silbert of employing “bad faith stall tactics” to delay a resolution in the ongoing dispute.