In a recent development that has sparked curiosity in the cryptocurrency community, it has been reported that cryptocurrency exchange Gemini made a substantial withdrawal of “hundreds of millions of dollars” from the crypto lender Genesis several months before Genesis declared insolvency. The revelation comes from anonymous sources familiar with the matter, shedding light on a significant financial maneuver within the crypto industry.
Gemini’s Massive Withdrawal from Genesis
According to sources cited in a Bloomberg report on September 28, 2023, Gemini executed a withdrawal of approximately $282 million worth of cryptocurrency from Genesis in August 2022. This move occurred a mere five months prior to Genesis’ lending arm filing for bankruptcy on January 20th.
The sources indicate that Gemini’s purpose in withdrawing these funds from Genesis was to establish a reserve. Allegedly, this reserve was intended to ensure adequate liquidity for Gemini Earn customers, allowing for “immediate redemptions.” Notably, the report emphasizes that none of this money went directly to Gemini’s co-founders, the well-known “Winklevoss twins” – Cameron and Tyler Winklevoss.
Genesis’ Troubled Path to Bankruptcy
Genesis, whose parent company is Digital Currency Group (DCG), faced significant challenges leading to its bankruptcy. DCG primarily attributed its downfall to the collapse of the cryptocurrency exchange FTX in November 2022, which had a ripple effect on various entities within the crypto space.
Adding to the complexities of this situation, on September 15, Genesis announced the cessation of its global trading services, marking a significant step in its winding-down process.
Gemini’s Opposition to Genesis’ Bankruptcy Plan
Gemini has actively opposed Genesis’ bankruptcy plan in recent times. On August 31, reports revealed that Gemini had criticized the plan for its lack of clarity and for being “woefully light” on specifics. According to Gemini, this lack of clarity complicates the ability of creditors to understand the payment process.
Furthermore, Gemini argued that since the lawsuit was initially filed in January, Genesis had made no substantial progress in repaying its creditors. Despite repeated assurances that a resolution was close, the exchange contended that there had been no significant movement toward a confirmable plan with creditor support.
The revelation of Gemini’s substantial withdrawal from Genesis shortly before its bankruptcy has raised questions about the dynamics of the crypto industry and the interactions between major players within it. The situation underscores the need for transparency and financial stability in the cryptocurrency space, as well as the complexities and challenges involved in navigating the volatile and rapidly evolving crypto market. As Genesis continues to wind down its operations, the impact on its creditors and the broader crypto ecosystem will be closely watched by industry observers.