- Genesis and DCG announce a tentative agreement to resolve bankruptcy issues with unsecured creditors.
- The in-principle deal could result in up to 90% recovery for unsecured creditors.
- Negotiations are ongoing since Gemini and Ad Hod Group of Genesis lenders do not agree to the deal.
Digital Currency Group (DCG), a major venture capital firm in the cryptocurrency industry, has struck an in-principle agreement with its creditor and subsidiary, Genesis, to settle the claims that surfaced during a filing made on Monday with the U.S. bankruptcy court in the Southern District Of New York.
Along with other potential claims, the agreement calls for a payment of around $630 million in unsecured loans that were due in May 2023 and a $1.1 billion unsecured promissory note due in 2032.
According to the in-principle deal, the payback will take place in two stages. First, an initial repayment of about $328.8 million with a two-year maturity will be made. This will be followed by a second repayment of $830 million with a seven-year maturity.
DCG has also agreed to make a further $275 million payment, which will be made in four equal installments. These payments, which will take care of the maturing debts connected with the unsecured loans due in May 2023, are scheduled to be made after the partial repayment agreement date.
If the deal is consummated, Genesis could be on the way to offering recoveries of between 70% and 90% in U.S. dollar equivalent to unsecured creditors. It will also offer a 65%-90% recovery on an in-kind basis depending on the denomination of the digital asset. Notably, all the estimated recoveries are subject to market pricing and definitive documentation.
In a statement to Reuters, DCG stated that it is “pleased to reach an agreement in principle with Genesis and the Unsecured Creditors Committee, which will provide a framework for a comprehensive resolution of the claims in the Genesis Chapter 11 cases and a pathway to significant recovery for creditors.”
“The agreement in principle will be documented and submitted to the Bankruptcy Court for final approval in connection with confirmation of a chapter 11 plan. We look forward to executing on this important milestone and for Genesis to begin its distributions to creditors,” the venture capital company added.
Deal Not Final
Notably, neither Gemini nor the Ad Hoc Group of Genesis’ lenders support the deal.
“Although the mediation has terminated, constructive discussions with the Ad Hoc Group and Gemini regarding the aforementioned agreed-upon deal in principle are ongoing and the parties remain committed to continuing these discussions with a goal of achieving a fully consensual plan,” reads the filing.
Through its attorneys, Genesis declared that it would keep cooperating with all of its creditors, “including those who have not agreed to the deal in principle.”
The current deal is the second that DCG and Genesis have proposed since Genesis declared bankruptcy in January following the demise of the FTX cryptocurrency exchange. Genesis revealed the first proposal in February, which was said to be supported by Genesis creditors representing more than $2 billion in claims
But as a portion of the creditors abandoned it, the deal fell apart. The parties resumed their discussions after which a mediator was appointed by the court to help them reach a new agreement.
When Genesis Global Holdco, LLC and its affiliates submitted a bankruptcy petition to the Southern District of New York chapter of the United States Bankruptcy Court, the company revealed that Genesis owed its top 50 debtors almost $3.5 billion.
These creditors include market leader Cumberland, Mirana, MoonAlpha Finance, and VanEck’s New Finance Income Fund. Crypto exchange Gemini, which worked with Genesis on a lending program called Gemini Earn which was halted in November, tops that list with claims worth $766 million.
