Genesis parent misses $630 million payment to Gemini

This situation was anticipated as there were concerns about the possibility of DCG defaulting on the loan or restructuring its debt, which is now being managed by Genesis’ bankruptcy estate. Gemini initially granted DCG a 30-day period to secure the necessary funds as part of a mediation process. The cryptocurrency exchange alleged that Genesis was responsible for the failure of its own interest-bearing lending product, Gemini Earn.

In the recent update posted on its website, Gemini mentioned that it is currently assessing the potential of offering forbearance to Digital Currency Group (DCG) in order to avoid a default. The cryptocurrency exchange led by the Winklevoss twins, along with creditor committees, is actively considering this option as a means to provide temporary relief to DCG.

In the event that a forbearance agreement is not reached, Gemini intends to proceed with a proof of claim plan, known as the Master Claim, in an attempt to recover more than $1.1 billion in funds. The exchange outlined its intentions to pursue this course of action. This plan would be proposed independently by Gemini, without the need for consent or involvement from Digital Currency Group (DCG).

“Genesis and its creditors, represented by the Official Committee of Unsecured Creditors, the Ad Hoc Group of Genesis Lenders, and Gemini Trust, are working collaboratively to address Digital Currency Group’s nonpayment of approximately $627 million in dollars and BTC that was due last week during the ongoing mediation period.  Among other things, as part of the ongoing mediation process, the parties are discussing potential terms of forbearance, a standalone chapter 11 plan for Genesis and other options to recover assets and maximize value to stakeholders,” a committee representing the joint debtors told FinanceFedds in an email statement.

Earlier in April, Gemini received a personal $100-million loan from its founders. Earmarked for its customers, the payment could be part of the exchange’s agreement with bankrupt Genesis Global Capital and parent Digital Currency Group.

Genesis attorney told a U.S. bankruptcy judge in February that the agreement will see Barry Silbert-owned DCG exchange its outstanding $1.1 billion note due in 2023 for convertible preferred stock. The deal is part of Genesis’ bankruptcy plan agreed with its creditors that entails DCG refinancing its current 2023 term loans through new term loans issued in two tranches with an aggregate total value of approximately $500 million.

Under the restructuring agreement, this arrangement would either result in the sale of Genesis or turn over its equity to creditors, effectively bringing all entities under the same holding company. Additionally, Gemini will contribute up to $100 million to compensate Earn users with frozen assets and ensure that they will fully recover their funds.

Owing creditors at least $3.4 billion, Genesis had already halted most activity on its platform and froze customer redemptions on November 16, citing a liquidity crunch triggered by significant exposure to FTX.