It’s Sagittarius season, but the crypto world is buzzing about Gemini Trust Co. Last week, Genesis Global — a crypto lender — sued its partner Gemini Trust Co. for almost $700 million. It seems that crypto failures are written in the stars (and in every Newsletter) recently, but the outcome for Genesis and Gemini remains up in the air.

Together, Genesis and Gemini had an investing program called Earn. Genesis re-invested Earn customers’ crypto assets, paying customers the interest. In a custodial role, Gemini is Genesis’ largest creditor and processes these deposits and withdrawals for a cut of Genesis’ payments to the customers. Unfortunately, all Genesis earned from this deal was bankruptcy: in its suit, Genesis claimed that Gemini withdrew $689 million, at the expense of other creditors, in a “run on the bank” before Genesis could file for Chapter 11 bankruptcy protection. However, Gemini argued that Genesis should repay its customers instead of focusing on clawing back all the withdrawals the customers made. Currently, Genesis is involved in a NY civil fraud lawsuit that might force it into a bankruptcy liquidation. This liquidation would return some crypto assets to customers, but would not resolve Genesis’ many legal issues.

The beef here has a bunch of tiers. There’s the issue of Gemini knowing Genesis’ loans were under-secured (and very concentrated at SBF’s crypto hedge fund Alameda, which has dug itself a hole). There’s also the allegation that Gemini, despite internal analyses revealing Genesis’ financial backing was shaky, billed the Earn program as a “low risk investment” opportunity. (And we all know the stereotype that Geminis are two-faced.) Further, the SEC sued Genesis, Gemini, and Genesis’ parent company Digital Currency Group last January, alleging that they defrauded investors out of over $1 billion. And NY Attorney General Letitia James seeks to ban all three of these crypto firms from the NY investment scene.

THE VERDICT

Genesis urges the court to remedy this “unfairness and return Defendants to the same position as Plaintiff’s other similarly-situated creditors.” But it seems that nobody involved stands to win — with almost $700 million in limbo, it’s likely that Genesis and Gemini’s legal troubles are far from over.