658 B.R. 31
Bankr. S.D.N.Y.2024Background
- Genesis Global Capital, LLC (GGC), Genesis Global Holdco, LLC (Holdco), and Genesis Asia Pacific PTE. Ltd. (GAP) are debtors in Chapter 11 bankruptcy proceedings.
- Gemini Trust Company, LLC (Gemini), as agent for its customers, made loans to GGC under the "Gemini Earn" program, governed by Master Loan Agreements (MLAs), with a Security Agreement outlining the use of certain Grayscale Bitcoin Trust (GBTC) shares as collateral.
- There were two tranches of GBTC shares: the "August 2022 Collateral," which was transferred to and foreclosed on by Gemini, and the "Additional GBTC Shares," which were never transferred to Gemini.
- Gemini sued, claiming a security interest in the Additional GBTC Shares, argued those shares should not be part of the bankruptcy estate, and sought a constructive trust in the alternative.
- Defendants moved to dismiss, arguing the contractual requirements for a security interest were not met because no transfer to Gemini occurred; Gemini counter-moved to dismiss certain counterclaims.
- The case is at the motion to dismiss stage, focusing on Gemini’s entitlement to the Additional GBTC Shares, the character of the property, and the role of the non-GGC defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of security interest in Additional GBTC | Gemini argued the agreements and parties’ intent created a security interest | Defendants argued no security interest without transfer to Gemini | No security interest—clear contract language required actual transfer; none occurred |
| Are Additional GBTC Shares property of the estate | Shares are not property of the estate; GGC held them only for the pledge | Shares are property of the estate; GGC received full title | Shares remain estate property since title passed to GGC and no subsequent transfer to Gemini occurred |
| Constructive trust over Additional GBTC Shares | Failure to deliver shares and special circumstances justify constructive trust | Existence of contract precludes constructive trust, no adequate showing | Dismissed—right to relief governed by contract, not equity; constructive trust not available in bankruptcy |
| Dismissal of claims against Holdco & GAP | Gemini has insufficient info but suspects involvement | No facts alleged linking Holdco/GAP to relevant conduct | Dismissed without prejudice—no facts pled connecting Holdco/GAP to underlying claims |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (standard for plausibility in pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard; plausibility requirement)
- Schron v. Troutman Sanders LLP, 20 N.Y.3d 430 (best evidence of parties’ intent is the contract language)
- W.W.W. Assoc., Inc. v. Giancontieri, 77 N.Y.2d 157 (extrinsic evidence not admissible to vary unambiguous contracts)
- Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (plain meaning rule for contract interpretation)
- John Hancock Mut. Life Ins. Co. v. Carolina Power & Light Co., 717 F.2d 664 (specific contract language overrides general)
- Simonds v. Simonds, 45 N.Y.2d 233 (elements for constructive trust)
- Superintendent of Ins. v. Ochs (In re First Cent. Fin. Corp.), 377 F.3d 209 (constructive trust in bankruptcy; effect of contract)
- Universal Am. Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 25 N.Y.3d 675 (parties cannot manufacture ambiguity)
- In re Emergency Beacon Corp., 665 F.2d 36 (perfection of security interest requires rights in collateral)