Gemini criticizes Genesis recovery plan as ‘deceptive at worst’
Crypto exchange Gemini has criticized a proposed bankruptcy recovery plan related to Genesis, Gemini’s partner on a lending program that has been frozen for months.
Genesis and its parent company, Digital Currency Group (DCG), previously announced that Gemini Earn users are estimated to recover approximately 95-110% of their claims. Additionally, DCG’s bankruptcy plan outlines a potential path for unsecured creditors who could receive between 70% to 90% of their owed amount in USD, and in-kind recoveries could range from 65% to 90% based on the asset allocation.
However, Gemini claims that the plan lacks clarity and crucial information, which raises concerns. It called the deal “misleading at best” in a court filing.
“DCG touts proposed recovery rates that are a total mirage – misleading at best and deceptive at worst. Make no mistake: Gemini Lenders will not actually receive anything close in real value terms to the proposed recovery rates under the current ‘agreement in principle,” Gemini’s lawyers said in the filing.
A group of ad hoc creditors called the Fair Deal Group also filed an objection to the proposed plan, citing similar reasons. They expressed concerns that the proposed agreement fails to secure all the debts Genesis owes and that the troubled firm is not showing any evidence to formulate a viable plan.
All three parties are requesting an end to a special exclusivity period that allowed Genesis to negotiate terms for resolving its bankruptcy through mediations.
The situation has worsened recently, as creditors have not received payments for loans that were supposed to be paid after reaching maturity in May. These unpaid loans have a combined value of approximately $630 million.
Digital Currency Group (DCG) owes over $1.65 billion to Genesis, while the latter owes around $1.2 billion to Gemini. Overall, Genesis owes more than $3 billion to its top 50 creditors. DCG has proposed a repayment plan that would see the owed money paid across two tranches over seven years, with the aim of eventually making Gemini Earn users “nearly whole,” according to DCG’s lawyers.
An executive from Digital Currency Group told CoinDesk that depending on how the bankruptcy claim is calculated, Gemini Earn customers are estimated to receive between $440 million and $765 million of a claim. These customers are also expected to receive distributions ranging from $400 million to $535 million. Additionally, they will have access to the $600+ million worth of collateral that Gemini is holding. As a result, they are potentially looking at total recoveries exceeding a billion dollars, which aligns with their total claim, essentially achieving a full recovery for current customers under these scenarios.
