Another creditor group claims Genesis is buying FTX’s backing through the settlement.

Cryptocurrency exchange Gemini has rejected a proposed settlement between bankrupt cryptocurrency platform FTX and Genesis, according to court documents on August 31.

Gemini believes that the proposed settlement between the bankrupt companies is an attempt to manipulate the voting process for the bankruptcy plan, and further describes it as a “sweetheart, pre-planned deal” designed to benefit only Digital Currency Group (DCG), the parent company of the bankrupt companies, at the expense of other creditors.

Earlier this month, Genesis and FTX revealed that they had reached an agreement on their debt claims against each other. According to the details, the settlement will allow the failed cryptocurrency exchange's sister company, Alameda Research, to claim $175 million from Gemini, compared to the initial claim of $3.88 billion. On the other hand, Genesis will give up its $226 million claim against FTX.

At the time, the bankrupt companies claimed the deal was fair and provided them a path to restructuring.

Gemini argued that Genesis adopted this arrangement because its bankruptcy proposal could not gain support from creditors and therefore chose to use FTX to influence the voting process.

Gemini and Genesis have previously collaborated substantially through the Gemini Earn program.

However, the exchange has taken legal action against the bankrupt lender’s parent company DCG, claiming that it knew the lender was bankrupt since 2022 but failed to inform investors.

Gemini claims Genesis owes more than $1 billion to its 232,000 Earn users.

Another creditor group rejected the deal.

Meanwhile, a “special group” of creditors called the Fair Deal Group also opposed in principle the proposed deal between Genesis and FTX.

The group asked why Genesis wanted to “force its creditor community to reach a settlement with FTX, which it overwhelmingly opposes, rather than leaving the issue to creditors in a post-confirmation trust.”

The group described Genesis’ actions as a “perversion of the Chapter 11 process.” It wrote:

“Genesis seeks to gain the support of the FTX debtors and their votes by entering into the proposed settlement agreement.” #Gemini  #Genesis