Going forward, this verdict can set a precedent for investors across the crypto industry and what one’s terms of use really means for people who deposit onto platforms. This could also point to what may happen with other Chapter 11 bankruptcy proceedings transpiring in the crypto space like FTX, Voyager and BlockFi, to name a few.*
Looks like Gemini won’t be getting back their funds any time soon if ever.
This reenforces the additional risk if you authorize your stock broker to loan your stock by authorizing your ability to use margin. If they go belly up, you may join the long list of general unsecured creditors, rather than having your holdings sequestered on your behalf.
My mind has been buzzing with ideas for two businesses. One was to be an NFT platform but I am voting no. It is all based on my design ideas which have marched forward. In the last 24 hours I have spoken with partners on a different idea well fleshed out for a business. The three other partners will be kicking the hell out of the tires.
Just an interesting note. I looked this up after my conversations with two of the partners. Opensea’s CFO has claimed Opensea made a profit in the 4Q21. That implies no profits before or since…??? Opensea has a lot of cash. Opensea has been very successful at raising money but may not make any profits till sometime in 2024 if then.
You know Jeff I hadn’t even thought of that. So if you do not use margin at all but allow the stock to be loaned out the same thing could happen? I didn’t even realize that was a risk. Thanks.
I don’t know that this ruling will really affect that. Remember, this ruling is based on the specific Terms of Service that were drafted governing Celsius depositors’ relationship with Celsius. Those ToS governing customer deposits may be similar across some of these platforms (like Gemini). But for Gemini itself in its loan to Genesis (the Silbert-controlled DCG entity), its position will be governed by the specific terms of the loan agreement - which are going to be specific to that loan, and certainly different than the typical customer-facing ToS.
Not that I disagree that Gemini isn’t getting their money back any time soon. Their loan is probably secured by collateral (unlike the unsecured customer accounts), but that collateral has probably collapsed in value and/or is itself illiquid. Plus, Silbert has claimed that the loan isn’t a demand loan, and isn’t even due yet for another four months - which is more than enough time for Gemini’s liquidity crisis to land them in bankruptcy.
I am not sure either Albaby, but Gemini didn’t loan money to Genisis. They deposited the money with Genisis and received a high interest rate for it. I assume the depositors into Gemini probably authorized this because it’s common in the Crypto industry. They call it staking. But that is just a guess on my side. But this is getting very convoluted.
Well, I found what I think is the relevant agreement. And it’s a little Column A, and a little Column B - but I think closer to what you describe.
There’s a Master Agreement between Gemini and Genesis where Gemini agrees as custodian for their customers to loans of customer assets to Genesis. Put simply, the customer is the Lender, Genesis is the Borrower - but the terms governing that loan are specific to that loan, not the ToS between Gemini and the customer - and maybe not the standard ToS between Genesis and its “ordinary” depositors.