According to a CoinDesk report, crypto lending company Genesis and its parent company, Digital Currency Group (DCG), are moving forward with the former’s bankruptcy process.
In this regard, the companies have reached an “agreement in principle” to restructure the lending company. According to the report, DGC and Genesis have reportedly convinced a group of creditors about the agreement. According to the latter, Genesis will have to “reduce” its loan portfolio and will have to sell some of its subsidiaries.
DCG’s plans for Crypto Lender Genesis
According to the aforementioned report, the agreement in principle requires DCG to “refinance” its $500 million cash loan and its $100 million in Bitcoin. The source did not provide further details on the agreement, but said the refinancing process includes the following:
“An equitization of the infamous 10-year promissory note that DCG gave Genesis in return for failed hedge fund 3AC (Three Arrows Capital) claims.”
A promissory note that was $1.1 billion to Three Arrows Capital (3AC), a cryptocurrency hedge fund that collapsed last year.
DCG and Genesis reached this agreement with a group of creditors representing individuals and companies with claims of more than $2 billion, against the cryptocurrency lending company.
Now, the entities will propose a similar agreement to other creditors, including those users who signed up for the Gemini Earn program from the Gemini cryptocurrency exchange. As we know, cryptocurrency lending company Genesis filed for bankruptcy on 20 January following several critical events.
For one thing, the collapse of 3AC’s CEO may provide predictions about how the ending of the crypto war between DCG and Genesis, which was in business with both entities.
For the former, DCG issued a promissory note, as CoinDesk’s source mentions, to keep Genesis’ balance sheet positive and continue operations. However, the collapse of FTX put the company under such pressure that it was forced to halt operations.
In this context, users of Gemini’s earning program were locked out of their funds. The cryptocurrency exchange and its founders, Cameron and Tyler Winklevoss, held discussions with DCG and Barry Silbert to make their users whole.
However, the entities have not been able to reach an agreement, and it is currently unclear whether they will accept the initial agreement and move forward. It is worth noting that Cameron Winklevoss celebrated Genesis’ bankruptcy filing as a “crucial step in being able to recover your assets.”
In any case, should Gemini accept the settlement, DCG and Silbert could avoid further lawsuits filed against them. In addition, Gemini Earn users might have a better chance of recovering their funds.
The CEO of 3AC on the crypto war between DGC and Genesis
Su Zhu, co-founder of Three Arrows Capital, spoke in a Twitter thread about the escalating crypto war between Digital Currency Group (DCG) CEO Barry Silbert and the Winklevoss twins, founders of the US exchange Gemini.
As reported by Bitcoinist, Cameron Winklevoss published an open letter denouncing Silbert’s misconduct, setting a deadline for a solution until 8 January:
“You took that money – teachers’ money – to fuel greedy stock buybacks, illiquid venture capital investments and Kamikaze Grayscale NAV [net asset value] transactions that inflated the AUM generating fees [assets under management] your Trust; all at the expense of creditors and all for your own personal gain.”
Zhu explains that DCG, the parent company of the Grayscale Bitcoin Trust (GBTC), conspired with FTX. To attack Luna and stETH and made “a lot” of money in the process. In addition, DCG suffered significant losses during the summer. Due to the bankruptcy of 3AC as well as Babel and other companies involved in GBTC, he claims.
Zhu also claims that Silbert deceived Three Arrow Capital for months, using various methods to attack and not asking anyone how Genesis “filled the hole.”
That’s not all, because Zhu goes on to say that even though they, FTX and DCG, were insolvent, they accepted more deposits in the hope that the market would go up and eliminate the problem.
Ultimately, according to the 3AC CEO, DCG’s value is zero and most of the OGs were close to Barry and SBF from the beginning, who was on the Genesis board. In addition, Genesis granted the first FTT-guaranteed loan to SBF.
The bankruptcy protection petition of Genesis
Genesis Global Holdco LLC, the holding company of troubled cryptocurrency lender Genesis Global Capital, filed for bankruptcy protection under Chapter 11 in New York after being hit by two of the industry’s biggest crashes of 2022.
Genesis Global Holdco, LLC and its subsidiaries Genesis Asia Pacific Pte. Ltd and Genesis Global Capital, LLC filed a trio of voluntary petitions with the US Bankruptcy Court for the Southern District of New York.
All three fall under the umbrella of Digital Currency Group, which also owns CoinDesk. Genesis has moved for joint administration of the cases. In its filing, Genesis Global Capital, the partner company in Gemini’s defunct Earn program, estimated more than 100,000 creditors and between $1 billion and $10 billion in liabilities as well as assets.
The other two entities estimated their assets and liabilities in the range of $100 million and $500 million, respectively. Genesis owes more than $3.5 billion to its top 50 creditors. Including cryptocurrency exchange Gemini, trading giant Cumberland, Mirana, MoonAlpha Finance, and VanEck’s New Finance Income Fund, according to the published bankruptcy filing.
These companies include Genesis’ cryptocurrency lending business, which was rocked last year by the implosions of hedge fund Three Arrows Capital and cryptocurrency exchange FTX.
Other Genesis subsidiaries involved in derivatives and spot trading as well as custody, including Genesis Global Trading, were not included in the filing and continue client trading operations, according to a press release.