key takeaways
- Genesis, Digital Currency Group and Gemini announced yesterday that they had reached an agreement in principle.
- The restructuring plan involves Genesis Global Trading becoming part of Genesis Global Holdco.
- Gemini will contribute up to $100 million to make Gemini Earn clients whole.
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After weeks of tense back and forth, Digital Currency Group, Genesis and Gemini appear to have reached an agreement on a possible restructuring plan, which still needs court approval.
a positive step
Genesis seems to have found a solution to its current solvency problems.
The bankrupt crypto lending company Announced that it had reached, together with parent company Digital Currency Group, an agreement in principle with its creditors, including cryptocurrency exchange Gemini.
According to the press release, the deal involves Digital Currency Group exchanging an existing $1.1 billion note due 2023 for convertible preferred shares to be issued as part of Genesis’s bankruptcy plan. Digital Currency Group will also refinance its current 2023 term loans through new term loans issued in two tranches (one dollar-denominated, the other Bitcoin-denominated) for a total aggregate value of approximately $500 million.
In addition, Digital Currency Group is required to contribute its equity stake in Genesis Global Trading (the trading arm of Genesis) to Genesis Global Holdco (the crypto lending business that declared bankrupt on January 19), effectively putting all Genesis entities under the same holding company.
In exchange, Gemini, Genesis’s largest creditor, has agreed to put up $100 million to ensure that Gemini Earn users fully recover their funds. Genesis and Gemini established the Earn program in December 2020 to offer Gemini clients the ability to lend their crypto assets to Genesis and earn interest on them. However, Genesis froze their redemption services immediately after the collapse of FTX; Gemini co-founder Cameron Winklevoss has repeatedly claimed that Genesis owes Gemini Earn customers more than $900 million.
While the deal remains subject to court approval, the news marks a positive step in resolving Genesis’s liquidity difficulties. At the beginning of the year Winklevoss published Open letters on Twitter accusing Digital Currency Group CEO Barry Silbert of defrauding Gemini Earn clients, even calling on the company’s board of directors to remove him from office.
Disclaimer: At the time of writing, the author of this article owned BTC, ETH, and various other crypto assets.