Three Gemini Earn customers have asked for class action arbitration against Genesis Global Capital and Digital Currency Group as a result of their restrictions on withdrawals and the termination of Gemini's Earn redemption program.
Class-action arbitration, a process for settling issues between parties by a neutral third-party arbiter, is commonly seen as an alternative to class-action litigation. Arbitration proceedings are frequently unofficial and voluntary. The arbitrator's ultimate decision, however, cannot be contested, so it might proceed more quickly and inexpensively than a class-action case.
As required by the Master Agreements between the corporation and users, the plaintiffs claim that Genesis failed to return their digital assets as well as those of all other Gemini Earn members.
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.
To hide its insolvency, DCG exchanged a promissory note with a 2033 due date for the right to collect a $2.3 billion debt owing to Genesis by the now-bankrupt hedge fund Three Arrows Capital for a note with a $1.1 billion principle.
Transactions involving securities are effectively unregistered as a result of Genesis' Master Agreement.
Further claiming that the Master Agreement essentially results in unregistered securities transactions, the group is asking for the cancellation of the sale contracts as well as damages to be paid.
Investors Brendan Picha and Max J. Hastings also filed a class action lawsuit against Gemini in late December, alleging that the exchange sold unregistered stocks through its Earn program.
According to a document from the Pica and Hastings class action, "Genesis was unable to refund the crypto assets it borrowed from Gemini Earn investors when Genesis suffered financial distress as a result of a series of crashes in the crypto market in 2022, including FTX Trading Ltd. ("FTX"). All investors who still had stakes in the scheme, including the plaintiffs, were effectively eliminated when [Gemini] refused to recognize any additional investor redemptions."
The plans to resume Genesis withdrawals caused a Twitter fight between DCG CEO Barry Silbert and Gemini co-founder Cameron Winklevoss late on Monday. Winklevoss accused Silbert of adopting "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 settling this matter.