Gemini is suing Genesis in GBTC collateral dispute

Driving the news: Gemini, the exchange owned by Tyler and Cameron Winklevoss, sued bankrupt lender and former partner Genesis on Friday, asking the court to determine the rightful owner of GBTC shares that are now worth some $1.6 billion.

• Genesis did not respond to a request for comment.

Flashback: This goes back to a transaction misstep Axios has detailed before.

• Genesis, as part of an agreement, pledged 30.9 million shares of GBTC (the "Initial Collateral") as collateral for Gemini's Earn customers and sent the first tranche to Gemini last year.
• Gemini sold those shares and is holding onto $284.3 million (the "Foreclosure Value") in proceeds.

What they're saying: "Now, Genesis wants to use the current value of the Initial Collateral — more than $800 million — instead of the Foreclosure Value to determine the Earn Users' deficiency claim," Gemini's filing reads.

Between the lines: In effect, Genesis is treating those shares as if Gemini hadn't sold them and is valuing them on recent price, which has risen a lot on the back of a bitcoin rally and the bullish promise of a spot bitcoin ETF.

• By the numbers: The price of GBTC has drawn closer to the value of its underlying bitcoin, a discount of around 15% from the 45% gap in January.

The intrigue: Genesis wants to sell the additional 31.1 million GBTC shares (the second tranche promised to Gemini's Earn customers) and distribute the proceeds to their other unsecured creditors, which Gemini opposes.

• Gemini says the two parties have been trying to seek a resolution over the entirety of Genesis' Chapter 11 case that started in January.

Go deeper: Gemini, Genesis and DCG hit with civil fraud suit in continuing crypto saga