In response to Genesis Global Capital and Digital Currency Group freezing withdrawals and Gemini suspending its Earn redemption program, three Gemini Earn users have requested class action arbitration against them.
A class-action lawsuit is frequently viewed as an alternative to class-action arbitration, a process for resolving disputes between parties by a neutral third-party arbitrator. The arbitration process is typically informal and voluntary.
However, the arbitrator’s decision is final and cannot be challenged, so it may go more quickly and cheaply than a class-action lawsuit.
Gemini users claim that Genesis failed to return digital assets
According to the claimants, Genesis failed to return their digital assets as well as those of all other Gemini Earn users as required by the Master Agreements between the company and users.
They argue that Genesis first broke the Master Agreement when it failed to inform its customers of the company’s bankruptcy in the summer of 2022.
Then, according to their allegations, Genesis engaged in a fraudulent transaction with its parent company, DCG, to conceal its insolvency. Specifically, they say Genesis exchanged its right to recoup $2.3 billion owed to it by the now-insolvent hedge fund Three Arrows Capital for a promissory note with a 2033 due date for a note with a $1.1 billion principal.
The group also argues that Genesis’ Master Agreement effectively results in unregistered securities sales, and they are requesting the cancellation of the sale contracts as well as compensation for their losses.
Investors Brendan Picha and Max J. Hastings also filed a class action lawsuit against Gemini in late December, alleging that the exchange sold unregistered securities through its Earn program.
The plans to resume Genesis withdrawals caused a Twitter argument between DCG CEO Barry Silbert and Gemini co-founder Cameron Winklevoss late on Monday. Winklevoss accused Silbert of using “bad faith stall tactics.”
Winklevoss asserts that Genesis and DCG owe Gemini and its clients $900 million, and he gave Silbert until January 8 to publicly commit to resolving this matter.