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Genesis, DCG Reach Deal With Creditors — Is the Saga Over?

Last Updated August 29, 2023 11:10 AM
Teuta Franjkovic
Last Updated August 29, 2023 11:10 AM
Key Takeaways
  • Digital Currency Group and Genesis creditors strike a deal on bankruptcy petition
  • Repayment plan targets 70%-90% recovery in USD.
  • It also sees 65%-90% in-kind, based on asset value.
  • Transaction seeks to resolve DCG’s $630M and $1.1B commitments by 2032.

According to a court filing  on Tuesday, August 29, Genesis Global and Digital Currency Group (DCG) have achieved an agreement in principle on a bankruptcy restructuring plan already approved by creditors.

Following its entry into mediation in May  to settle disagreements on a reorganization plan, Bitcoin lender hopes to exit Chapter 11 protection. After reaching an agreement with the Official Committee of Unsecured Creditors and its parent company, Digital Currency Group (DCG), Genesis said in the court filing  that mediation had come to an end.

Replacing Unsecured Debt with New Loans

In accordance with the agreement , DCG will give Genesis creditors new funding worth around $1.4 billion. This consists of a loan for $328.8 million, a second-lien loan for $830 million, and installment payments totaling $275 million. The new loans would take the place of current DCG unsecured debt.

Proposal’s value-dependent: 70-90% USD or 65-90% in-kind recovery for unsecured creditors, tied to market rates and legal processes.

DCG gets liability releases. Creditors’ committee won’t pursue claims against parent in Three Arrows Capital losses.

Parties are finalizing agreements and documents for an updated Chapter 11 plan, including the settlement.

Creditors can opt for early cash settlements under the reorg plan announced Tuesday, with further dividends as assets are monetized.

Winklevoss Offers $1.4Bn to End DCG Dispute

In the July 4 ‘Open Letter to Barry Silbert’, Cameron Winklevoss, a co-founder of Gemini, asserted that the DCG company engaged in “fraudulent behavior” through a “culture of lies and deceit” at the expense of Gemini’s 232,000 Earn users

Winklewoss then said  “the games are over” and added DCG has spent over $100 million on professional expenses, all of which have gone to attorneys and advisors at the expense of creditors and Earn customers, in addition to prolonging the resolution process.

Gemini co-founder was blunt about the incident’s nature, saying that it takes a particular type of person to owe $3.3 billion to hundreds of thousands of people and feel like a victim.

“Sam Bankman-Fried was not even close to being capable of such an illusion,” he  then said .

The declarations set a deadline: Silbert must accept by July 6 at 4 PM ET or face legal consequences. The situation is intriguing as it resolves a dispute among key industry players.

Genesis Filed Bankruptcy, Owing Over $3.5 Bn

In January 2023, Genesis, one of many crypto lending companies impacted by the severe bear market of 2022, filed for bankruptcy . To its top 50 debtors, which included companies like Gemini and VanEck’s New Finance Income Fund, the corporation owed more than $3.5 billion.

Just for reminder, Genesis stopped allowing withdrawals  in the middle of November 2022, citing unheard-of market turbulence caused by the failure of the FTX cryptocurrency exchange.

The corporation asserted that the incident led to “abnormal” withdrawals that exceeded its available cash.

The Genesis Lenders and Gemini, participants in the mediation, haven’t yet approved the interim agreement. Genesis stated it’s pursuing further discussions with holdouts and a completely consensual plan.

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