Gemini withdrew $282 million before Genesis bankruptcy: report

Months before Digital Currency Group's Genesis froze deposits and filed for bankruptcy in January, Gemini — the crypto exchange owned by the Winklevoss twins — pulled out millions of dollars from the crypto lender, according to two people familiar with the matter, Bloomberg reported. 

Gemini withdrew approximately $282 million in cryptocurrency from Genesis in August 2022, according to one source who wanted to remain anonymous as they were not authorized to discuss private information, Bloomberg stated. The withdrawal was first reported by the New York Post yesterday.

The funds were reportedly aimed at establishing a reserve, ensuring that Gemini Earn customers could immediately redeem their assets. None of these funds were directed to Tyler or Cameron Winklevoss, one of the sources said.

The crypto companies previously collaborated on Gemini’s Earn program, enabling users to lend their tokens via Genesis to earn yields on their crypto assets.

Neither Gemini nor Genesis immediately responded to a request for comment from The Block.

Frozen withdrawals, bankruptcy filings and ongoing feuds

Genesis froze customer withdrawals just days after FTX collapsed in Nov. 2022. Genesis said that its derivatives trading arm had $175 million locked up on the crypto exchange at the time. Genesis later filed for Chapter 11 bankruptcy protection in January.

Genesis, DCG, Gemini and other creditors initially reached a bankruptcy agreement to recover assets in February. However, the deal failed to materialize.

Gemini later sued Genesis, its parent company DCG and its founder Barry Silbert in July, accusing them of "fraud against creditors" and seeking to claim around $1.1 billion of assets stuck on Genesis. DCG said the lawsuit was "yet another publicity stunt from Cameron Winklevoss," and the firms have continued their feud since.

The Winklevoss twins' claims later sparked a probe of DCG by the U.S. Federal Bureau of Investigation and the Securities and Exchange Commission. The SEC previously charged Gemini and Genesis in January over an alleged unregistered securities offering relating to the Earn program.

Earlier this month, DCG's latest plan in Genesis’ bankruptcy proposed a new creditor agreement, potentially allowing Gemini Earn users to recover all their crypto.

The proposed agreement offers unsecured creditors a 70-90% baseline recovery, with a meaningful portion in digital currencies. However, Gemini Earn users could receive up to 110% of their claim due to the 31 million GBTC shares collateral Genesis posted to Gemini as part of their business relationship, now worth $607 million.

DCG criticized Gemini for not contributing financially to ensure a better recovery for Gemini Earn users. Gemini accused DCG of "gaslighting," with its lawyers calling the plan an "attempt to bait the Gemini Lenders into accepting a deal that would allow DCG to pay far less than it owes."