In a preliminary accord, Digital Currency Group (DCG) aims to recuperate funds for Genesis Global’s creditors, addressing claims that emerged post bankruptcy.
Digital Currency Group (DCG) has reached a preliminary agreement to recover the funds owed to creditors of Genesis Global, aiming to resolve the aftermath of its bankruptcy.
Genesis Global Holdco, LLC, together with its lending subsidiaries, Genesis Global Capital, LLC, and Genesis Asia Pacific Pte. Ltd., had initiated Chapter 11 bankruptcy proceedings in January 2023.
DCG’s intention is to address the financial predicament of its cryptocurrency lending subsidiary, Genesis. The filing was submitted on Monday to the U.S. bankruptcy court in the Southern District of New York.
As per the bankruptcy filings, Genesis had debts exceeding $3.5 billion owed to its top 50 creditors. Among them was Gemini, the exchange co-founded by the Winklevoss twins.
Gemini had collaborated with Genesis to offer a product called “Earn,” allowing customers to send crypto in anticipation of earning yields. Users were provided with the option to lend their cryptocurrencies to Genesis in exchange for interest payments. The Winklevoss twins claim that Genesis owes them $900 million through the discontinued Earn program.
Following Genesis’ bankruptcy filing, Cameron Winklevoss strongly reacted by accusing CEO Barry Silbert of “fraud” and threatening legal action. He demanded Silbert’s resignation unless DCG presented a “fair offer to creditors” to address the issue.
According to the preliminary agreement, unsecured creditors could potentially receive recoveries ranging from 70% to 90% in U.S. dollar equivalent. This settlement aims to bring resolution to ongoing disputes while ensuring equitable compensation for creditors.
The recovery in digital assets could range from 65% to 90%, depending on the specific denomination of the involved digital assets.
An essential aspect of the agreement also involves addressing DCG’s existing obligations and liabilities. This encompasses approximately $630 million in unsecured loans due in May 2023 and $1.1 billion under an unsecured promissory note due in 2032.
The repayment process is divided into two stages: an initial repayment of about $328.8 million, maturing in two years, followed by a subsequent repayment of $830 million with a maturity period of seven years.
DCG has also agreed to an additional payment of $275 million, distributed in four equal installments. This payment will cover the maturing debts linked to the unsecured loans due in May 2023 and is scheduled after the partial repayment agreement date.
However, Genesis’ former partner Gemini and the Ad Hoc Group of Genesis’ lenders have yet to endorse the in-principle agreement. Despite the termination of mediation, ongoing discussions aim to achieve a fully consensual plan.
With stakes in over 200 crypto companies, including Kraken and Circle, DCG’s extensive involvement has raised concerns within the broader crypto market. Furthermore, Genesis’ parent company operates the world’s largest Bitcoin fund – Grayscale Bitcoin Trust, which has faced scrutiny over the safety of its reserves since the FTX collapse.
This news is only analytical and informative and is not a recommendation for investment in any way.
