Digital Currency Group (DCG) has reached an in-principle agreement with Genesis Global’s creditors to resolve the claims that emerged during the crypto lender's bankruptcy, as revealed in a filing with the U.S. bankruptcy court in the Southern District Of New York on Monday.
Genesis Global Holdco, LLC and two of its lending business subsidiaries, Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd., filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in January 2023.
The bankruptcy filings revealed that Genesis owed over $3.5 billion to its top 50 creditors, one of which was the Winklevoss twins’ exchange Gemini. The exchange partnered with Genesis to offer its customers an opportunity to loan their crypto assets to the crypto lender in exchange for a promise to receive interest through the now-terminated Genesis Earn program.
The agreement could potentially lead to resolving outstanding issues and achieving a fair recovery for creditors, indicating that unsecured creditors could see a recovery ranging from 70% to 90% in U.S. dollar equivalent.
On an in-kind basis, the recovery is projected to range between 65% and 90%, with the exact percentage contingent on the denomination of digital assets involved.
SEC Hits Genesis, Gemini With Securities Law Violations for Gemini Earn Program
The beleaguered Gemini Earn program is now the linchpin in a new set of charges filed by the Securities and Exchange Commission against both Genesis and Gemini. In announcing the charges, the SEC says the firms "raised billions of dollars' worth of crypto assets from hundreds of thousands of investors" in Gemini Earn, describing it as an unregistered offering that qualifies as the sale of securities to retail investors. "We allege that Genesis and Gemini offered unregistered securities to the pu...
One of the key aspects of the agreement is centered around resolving DCG’s existing liabilities of approximately $630 million in unsecured loans due in May 2023 and $1.1 billion under an unsecured promissory note due in 2032.
Per the agreement, the repayment is expected to be conducted in two tranches: an initial repayment of around $328.8 million, scheduled for a two-year maturity, and a subsequent repayment of $830 million, with a maturity period of seven years.
Additionally, DCG has committed to a further payment of $275 million, which will be disbursed through four installments. These payments are set to be made subsequent to the partial repayment agreement date, addressing the maturing obligations associated with the unsecured loans due in May 2023.
"Digital Currency Group is pleased to reach an agreement in principle with Genesis and the Unsecured Creditors Committee, which will provide a framework for a comprehensive resolution of the claims in the Genesis Chapter 11 Cases and a pathway to significant recovery for creditors," DCG said in a statement shared with Decrypt. "The agreement in principle will be documented and submitted to the Bankruptcy Court for final approval in connection with confirmation of a chapter 11 plan. We look forward to executing on this important milestone and for Genesis to begin its distributions to creditors.”
Stumbling blocks remain
Notably, neither Gemini nor the Ad Hoc Group of Genesis’ lenders support the deal.
“Although the mediation has terminated, constructive discussions with the Ad Hoc Group and Gemini regarding the aforementioned agreed-upon deal in principle are ongoing and the parties remain committed to continuing these discussions with a goal of achieving a fully consensual plan,” reads the filing.
Gemini Lawsuit Accuses Barry Silbert and Digital Currency Group of Fraud
After threatening to do so for months, Gemini Trust Company accused Digital Currency Group (DCG) and its CEO Barry Silbert of fraud in a lawsuit filed Friday. In the complaint, the New York-based crypto exchange accuses DCG—parent company of bankrupt digital asset firm Genesis—and its founder of making "false, misleading, and incomplete representations and omissions to Gemini." Gemini and Genesis have been locked in a public battle over Gemini Earn, a program that allowed users to receive betwee...
Last month, the Winklevoss twins slapped DCG and its CEO Barry Silbert with a lawsuit, accusing them of fraud and making "false, misleading, and incomplete representations and omissions to Gemini."
The document further states that “there can be no assurance” that the debtors, the Official Committee of Unsecured Creditors, and DCG will reach agreement on the definitive documents or that other parties in interest involved in the Debtors’ chapter 11 cases will support the deal in principle.
