Digital Currency Group (DCG), the parent company of collapsed crypto firm Genesis, said it couldn’t provide an explanation as to why a group of Genesis creditors decided to backpedal on the earlier settlements, but “remains committed to reaching a fair outcome” for all its creditors.
“While it is difficult to understand the rationale given the limited engagement from Genesis creditors since the February court filing, our understanding is that a subset of creditors have decided to walk away from the prior agreement,” DCG said in a statement posted on Twitter.
“We do not know if the hundreds of thousands of individual creditors are aware of this development, but the latest maneuver will prolong the court process,” added the firm.
The conglomerate reiterated its commitment to ensuring a just settlement for all its creditors. However, it stated that it would review any new requests in light of previous concessions.
Genesis seeks to appoint a mediator
DCG’s statement came in response to Genesis submitting a motion for the appointment of a sitting bankruptcy judge in the Southern District of New York to act as a mediator in its disputes against its creditors, including Gemini, the cryptocurrency exchange helmed by the Winklevoss twins.
As per the filing, initial discussions with various stakeholders, including the official committee of unsecured creditors, aimed to address unresolved matters outlined in the restructuring term sheet.
However, recent talks have highlighted the need for a mediator to aid in resolving a crucial issue in the Chapter 11 proceedings: “the amount, form, timing and other terms and conditions of DCG’s contribution to the Debtors’ reorganization plan.”
The filing also stated that DCG owes Genesis Global Capital “approximately $630 million pursuant to certain fixed term loans due during the second week of May 2023.”
Given this, the debtors “believe that the mediation should be scheduled immediately.”
The fall of Genesis
Genesis launched the industry’s first ever over-the-countertrading desk in 2013, going on to become one of the industry’s largest players.
In November 2022, citing “abnormal withdrawal requests” following the FTX collapse, the firm suspended withdrawals, which also resulted in disruption of the Gemini Earn service—Gemini’s high-yield investment vehicle that had Genesis as a primary lending partner.
Genesis filed for Chapter 11 bankruptcy on January 19, prompting Gemini to threaten to sue both DCG and its CEO Barry Silbert unless they table a plan for repaying the $900 million loan Gemini made to the crypto lender.
The two sides reached an agreement “in principle” in February though, with terms of the deal stipulating that DCG would exchange its existing $1.1 billion note due in 2032 for convertible preferred stock, and refinance its existing 2023 term loans in two tranches made payable to creditors with an aggregate total value of approximately $500 million.
Shortly after, DCG confirmed plans to turn its Genesis Global Trading equity over to Genesis Global Holdco to eventually sell both companies and pay back clients.