Digital Currency Group (DCG) has entered into an
in-principle agreement with the creditors of its cryptocurrency lending
subsidiary, Genesis. This agreement could reportedly pave the way for
substantial recoveries, ranging from 70% to 90% in USD equivalent for unsecured
creditors.
The recent court filing
on August 29, 2023, outlines a compelling prospect for creditors of Genesis.
This includes the potential for 65% to 90% recovery on an in-kind basis.
However, the prospective recoveries are contingent upon the denomination of the
digital assets.
Recovery Prospects for
Genesis’ Creditors
Additionally, to address
the existing liabilities, DCG has reportedly devised a structured repayment
plan. With around USD $630 million in unsecured loans due in May 2023 and USD
$1.1 billion under an unsecured promissory note due in 2023, DCG’s strategy
involves a partial repayment agreement.
According to the court
documents, this agreement encompasses two tranches: the first totaling
approximately USD $328 million with a two-year maturity period; and the second
summing up to USD $830 million with a seven-year maturity. The calibrated approach
aims to streamline the repayment process and mitigate the financial strain.
Besides that, DCG’s
resolution includes a provision for further payments. The agreement indicates
that DCG would disburse USD $275 million in four instalments subsequent to the
partial repayment agreement as part of the May 2023 maturities.
Genesis, the crypto
lending arm, faced instability following the collapse
of FTX. This led to its
suspension of withdrawals and eventual bankruptcy protection filing in early
2023. This tumultuous journey has culminated in DCG’s in-principle agreement,
which is expected to resolve the claims that have plagued Genesis for months.
Genesis’ Troubled Path
Recently, Finance
Magnates reported that
DCG had sought
a dismissal of Gemini’s fraud allegation. The dispute focuses on Gemini’s Earn program,
which allowed retail customers to earn interest by lending their
cryptocurrencies to Genesis. The collapse
of 3AC in June 2022 and
the subsequent ripple effects, including the downturn of FTX, adversely
impacted Genesis’ operations.
“Debtors, DCG, and
UCC have reserved rights with respect to the 3AC-related liabilities, and any
potential claims the debtors or DCG have against the other party with respect
to the 3AC’s liabilities are fully preserved,” the latest court filing
stated.
In July, the cryptocurrency
exchange, Gemini sued
Digital Currency Group (DCG) and
its CEO, Barry Silbert. The lawsuit, filed in the New York court, contends that
both parties were involved in ‘encouraging and facilitating’ fraudulent
activity through Genesis.
However, in response to
the lawsuit, DCG dismissed Gemini’s claims as a ‘publicity stunt’ orchestrated by
Cameron Winklevoss, Gemini’s Co-Founder. DCG firmly denied any wrongdoing,
asserting that the accusations were baseless and defamatory.
This article was written by Jared Kirui at www.financemagnates.com.
