Digital Currency Group and Genesis Reach In-Principle Agreement With Creditors

Jimmy Aki
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Digital Currency Group (DCG), a major venture capital firm in the cryptocurrency industry, has reached an in-principle understanding with creditors of its cryptocurrency lending branch, Genesis.

While this agreement promises a fair recuperation for the creditors, the endorsement from Genesis’ previous collaborator, Gemini, is still pending.

DCG Agreement Signals a Positive Future for Genesis Creditors

On August 29, Digital Currency Group reached an in-principle agreement with the creditors of Genesis Global to settle the claims arising from the crypto lender’s bankruptcy.

This was disclosed in a filing made in the U.S. bankruptcy court for the Southern District Of New York.

A key element of the agreement focuses on addressing DCG’s existing financial obligations. This encompasses about $630 million in unsecured loans due in May 2023 and a further $1.1 billion linked to an unsecured promissory note maturing in 2032.

In line with the terms of the arrangement, the repayment process will be split into two phases. First, an initial payment of approximately $328.8 million is scheduled for a maturity span of two years. Then, a subsequent payment of $830 million will be settled within a maturity period of seven years.

Furthermore, DCG has committed to an additional payment of $275 million. These payments are set to occur following the agreement’s partial repayment date, addressing the impending obligations tied to the unsecured loans due in May 2023.

As per the court filing, the potential recovery for unsecured creditors, should the revised plan gain approval, could range from 70% to 90% of the equivalent United States dollar value.

Furthermore, the filing noted that, depending on the denomination of the digital asset, the revised plan could result in recovery rates of 65% to 90% in terms of the actual digital assets.

As stated in the filing, debtors will start by making an initial allocation, encompassing all available cash and coins except for specific reserved sums and the early-pay allocation.

This initial allotment is anticipated to yield a 30-40% recovery rate. However, it may be adjusted due to alterations in market values, reserves for disputed claims, and costs related to restructuring or winding down.

Following this initial allocation, creditors will obtain proceeds from designated longer-term assets on forthcoming distribution dates as these assets are either converted to cash or received in full.

Overall, the firm’s objective will be to effectively pair assets with claims to optimize recoveries in the form of assets, and distributions will strive to be made in assets whenever feasible.

DCG also expressed satisfaction in achieving an in-principle agreement with Genesis and the Unsecured Creditors Committee (UCC).

The firm stated that this accord provides a framework to comprehensively address the issues arising from the Genesis Chapter 11 Cases and to offer a clear path for substantial creditor recovery.

In addition, DCG noted that this preliminary agreement will be formally documented and presented to the bankruptcy court for ultimate approval as part of the confirmation process for a Chapter 11 plan.

However, according to the filing, both Gemini and the Ad Hoc Group of Genesis’ lenders do not favor the agreement.

Genesis Struggles

The significant downturn in the crypto market in 2022 impacted numerous crypto lending companies, including Genesis.

In November 2022, Genesis temporarily halted withdrawal requests due to unparalleled market instability linked to the FTX crypto exchange’s downfall.

The company stated that this occurrence led to unusually high withdrawal demands, surpassing its available liquidity.

Subsequently, in January 2023, Genesis Global Holdco, LLC, 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.

The bankruptcy filings disclosed that Genesis owed over $3.5 billion to its top 50 creditors. These entities include crypto exchange Gemini, trading giant Cumberland, and financial innovators Mirana, MoonAlpha Finance, and VanEck’s New Finance Income Fund.

This recent agreement provides a lifeline for DCG and Genesis and presents a potential stabilizing influence on the volatile crypto market, which has been characterized by considerable uncertainty.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.