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Digital Currency Group

Genesis Bankruptcy Spurs DCG’s Pivotal Accord

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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.

Gemini Users Filed Class Action Lawsuit Against Genesis and Digital Currency Group

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In response to Genesis Global Capital and Digital Currency Group freezing withdrawals and Gemini suspending its Earn redemption program, three Gemini Earn users have requested class action arbitration against them.

A class-action lawsuit is frequently viewed as an alternative to class-action arbitration, a process for resolving disputes between parties by a neutral third-party arbitrator. The arbitration process is typically informal and voluntary.

However, the arbitrator’s decision is final and cannot be challenged, so it may go more quickly and cheaply than a class-action lawsuit.

Gemini users claim that Genesis failed to return digital assets

According to the claimants, Genesis failed to return their digital assets as well as those of all other Gemini Earn users as required by the Master Agreements between the company and users.

They argue that Genesis first broke the Master Agreement when it failed to inform its customers of the company’s bankruptcy in the summer of 2022.

Then, according to their allegations, Genesis engaged in a fraudulent transaction with its parent company, DCG, to conceal its insolvency. Specifically, they say Genesis exchanged its right to recoup $2.3 billion owed to it by the now-insolvent hedge fund Three Arrows Capital for a promissory note with a 2033 due date for a note with a $1.1 billion principal.

The group also argues that Genesis’ Master Agreement effectively results in unregistered securities sales, and they are requesting the cancellation of the sale contracts as well as compensation for their losses.

Investors Brendan Picha and Max J. Hastings also filed a class action lawsuit against Gemini in late December, alleging that the exchange sold unregistered securities through its Earn program.

The plans to resume Genesis withdrawals caused a Twitter argument between DCG CEO Barry Silbert and Gemini co-founder Cameron Winklevoss late on Monday. Winklevoss accused Silbert of using “bad faith stall tactics.”

Winklevoss asserts that Genesis and DCG owe Gemini and its clients $900 million, and he gave Silbert until January 8 to publicly commit to resolving this matter.

Crypto IPO: A $4 billion IPO can meet Barry Silbert’s DCG future

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When we talk of public-tradable companies in the digital asset industry, very few organizations will come to mind. These organizations are small businesses, and none of the multi-billion dollar corporations has taken a step into the Crypto IPO.

Over the past few years, there have been talks about Coinbase and BlockFi taking the big step forward but nothing constructive has manifested from either side till now. Now, According to Messari, a third party might also soon throw their hat into the Crypto IPO mix, which happens to be Barry Silbert’s Digital Currency Group.

Digital Currency Group or DCG is a venture capital company that has several established crypto businesses under its administration. The organization has been around for over 5 years, and it has developed corporations such as Genesis Global Trading and Grayscale Investments. Additionally, DCG also controlled CoinDesk and Internation retail exchange, Luno, under its wing.

While discussions over a Crypto IPO have not been raised publicly for DCG’s end, the report crunched down some numbers, which indicated that DCG would present a strong case for a successful IPO.

Barry Silbert and his numbers game with Genesis, Grayscale

According to the report, Genesis recently revealed its quarterly report for Q3 2020. Genesis Global Trading, an OTC crypto trading desk, and crypto lending/borrowing platform, registered loans which surpassed $5 billion on the quarter. The total active loans were estimated to be $2.1 billion which would bring is $42 million annual revenue at the moment.

Additionally, on the trading aside, Genesis registered over $1 billion in derivatives trading and $4.5 billion in spot volumes, where estimated trading revenue is expected to be around $8.8 million.

These are extremely impressive numbers and with respect to Grayscale, the crypto industry already had an idea. Grayscale’s flagship product, GBTC has continued to aggressively accumulate BTC in 2020, currently occupying close to 2% of total circulation. Grayscale was bringing in close to $159 million in revenue per year. The report added,

“With Genesis and Grayscale generating an estimated $50M and $123M a year, that still leaves Coindesk and Luno. On top of that, DCG also has a sizeable investment arm, consisting of both liquid and VC investments that would bring their total valuation to around $4.3 billion.”

DCG’s added advantage for its Crypto IPO

The $4.3 billion valuation of DCG is impressive. It is impressive enough to take the IPO step but Barry Silbert’s organization had an added advantage. One of the key fundamentals before going public is to attain a list of clients that come from an institutional background and high net worth individuals. A retail heavy clientele does not attract that right kind of people to undertake the proceeding of an IPO. For Genesis and Grayscale, it has been their major source of revenue. Genesis trading strictly caters to the demands of institutional investors and in 2019, it facilitated the crypto-fiat lending system due to immense institutional demand.

Grayscale’s stance in the public eye is already clear as day, with the investment wing catering to institutions trying to attain exposure to digital assets. Hence, with Digital Currency Group, a Crypto IPO can be manifested in a matter of months, if Barry Silbert decides to take the company public.