- The Digital Currency Group (DCG) intends to settle Genesis creditors with a $275 million payment in four installments. The move may offer a 70% to 90% return to unsecured creditors, depending on asset denomination.
- While Genesis owes nearly $1 billion to crypto exchange Gemini, it’s unclear whether the settlement plan includes any restitution to Gemini.
DCG’s Strategic Maneuver to Untangle the Genesis Debacle
Digital Currency Group (DCG), the parent company of beleaguered crypto lender Genesis, is taking calculated steps to quell a financial storm. According to recent court filings, DCG has brokered an in-principle agreement to settle the labyrinthine web of liabilities that Genesis amassed before filing for Chapter 11 bankruptcy earlier this year.
The Anatomy of the Settlement Plan
In financial jurisprudence, “Chapter 11” refers to a form of bankruptcy that allows a company to reorganize its debts and business affairs. Genesis fell into this dire stratum after a liquidity crisis triggered by the downfall of crypto exchange FTX. The documents delineate that Genesis is saddled with $630 million in unsecured loans due by May 2023 and an additional $1.1 billion promissory note due in 2032.
To tackle this mammoth obligation, DCG proposes to enact new debt facilities along with a repayment roadmap. The plan stipulates a $328.8 million first-lien facility with a 2-year maturity and an $830 million second-lien facility that matures in 7 years. The payment architecture outlines four installment payments amounting to $275 million. If executed seamlessly, this could yield a return of 70% to 90% for unsecured creditors, depending on the digital asset’s denomination, as specified in the filing.
A Ripple Effect on Gemini?
Genesis was not just any crypto lender; it was the custodian for Gemini’s Earn Product, which has placed the exchange in a precarious position. Gemini, founded by the Winklevoss twins, claims Genesis owes them close to $1 billion. The crypto exchange has even initiated legal action against DCG, which has subsequently filed a motion to dismiss the lawsuit, terming it a
“Twitter-based character assassination.”
As Genesis owes a staggering $3.6 billion to its top 50 creditors, the settlement could have a ripple effect on various entities, including Gemini. However, current documentation lacks clarity on whether Gemini would receive any portion of the debt settlement. Therefore, while DCG’s proposed settlement could be a lifeline for Genesis’ myriad creditors, its implications for Gemini remain an open question, wrapped in layers of financial complexity.