In a significant development within the crypto landscape, Digital Currency Group (DCG) has reportedly reached an in-principle agreement with Genesis creditors to address the claims stemming from the firm’s bankruptcy. The news, disclosed in a court filing on Tuesday, sheds light on the potential recovery prospects for both unsecured creditors and those with digital assets tied to Genesis.
According to the proposed plan, unsecured creditors stand to recoup between 70% and 90% of their investments in USD equivalent. For creditors with digital assets, the recovery could range from 65% to 90% depending on the denomination of the digital asset. However, it’s crucial to note that these anticipated recoveries are contingent upon market pricing and the finalization of precise documentation.
The genesis of this bankruptcy situation can be traced back to November of the previous year, when the lending arm of Genesis froze withdrawals following the collapse of FTX. Subsequently, in early 2023, Genesis sought refuge in bankruptcy protection. This situation prompted DCG, which holds a key position in the cryptocurrency sector, to engage in negotiations for a potential resolution.
To address its existing liabilities, primarily involving unsecured loans amounting to approximately $630 million due in May 2023, and an unsecured promissory note of $1.1 billion due in 2032, DCG and Genesis creditors have orchestrated a novel partial repayment agreement. The strategy involves two tranches of repayment – the first being about $328.8 million with a two-year maturity, and the second amounting to $830 million with a 7-year maturity.
Moreover, DCG has committed to making four installment payments totaling $275 million following the date of the partial repayment agreement, aimed at addressing the looming May 2023 maturities of $630 million in unsecured loans.
Genesis Collapse Unveils $3.5B Obligations to Creditors
Genesis’ journey into bankruptcy began in January 2023 when Genesis Global Holdco, LLC and its subsidiaries filed for bankruptcy protection under the U.S. Bankruptcy Court for the Southern District of New York. This action brought to light the extensive financial obligations the firm owed to its top creditors, which included notable entities like Gemini, Cumberland, Mirana, MoonAlpha Finance, and VanEck’s New Finance Income Fund. The total liabilities revealed in the filings amounted to over $3.5 billion.
The unfolding scenario signifies the evolving intricacies within the cryptocurrency sector, as major players grapple with unforeseen challenges and work towards stabilizing the ecosystem. While the in-principle agreement between DCG and Genesis creditors presents a promising path forward, the actual execution and its consequences within the volatile crypto market remain to be seen.