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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.

Genesis Trading Takes Lead in the Crypto Land Rush

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In a seismic shift that could redefine the landscape of the cryptocurrency market, Genesis Trading has detected a remarkable surge of traditional financial institutions vying for their share of the crypto pie. This recent phenomenon, often dubbed a ‘land grab’ by experts, marks a critical turning point that could potentially reshape the future of cryptocurrencies and blockchain technology.

Genesis Trading perceives the second quarter of this year as a defining period marked by a rush from established players aiming to claim a stake in the cryptocurrency space. In a report unveiled on Wednesday, the digital assets financial company, a subsidiary of Digital Currency Group, emphasized several noteworthy developments. These include the surge in applications for spot bitcoin exchange-traded funds (ETFs) and a continuous stream of fresh trading platforms and financial products introduced by traditional financial institutions.

Genesis Report Deciphers Transformative Crypto Trends

The report highlighted that, akin to leading cryptocurrency entity Coinbase expanding its offerings, the second quarter also marked the entrance of traditional financial players into the cryptocurrency landscape. This influx of established entities seems to have positioned themselves in the realm of digital assets. However, the report acknowledged a certain degree of skepticism in response to these developments.

The report elaborated that the validity of these changes lies within data concerning trading volumes, price fluctuations, profit margins, price trends, and the overall extent of involvement. With a broader perspective, the report concluded that the second quarter of 2023 had generally yielded positive outcomes.

In particular, the company emphasized that bitcoin showcased a notably higher level of activity than initially anticipated, with its trading remaining within a range of $27,000 to $30,000, indicating a relatively consistent performance.

However, Genesis Trading also observed the significant legal hurdles that have emerged over recent months. During this period, the Securities and Exchange Commission (SEC) took legal action against both Coinbase and Binance, accusing them of potential legal and securities infringements. Genesis Trading commented on this situation, highlighting the growing realization that as long as there exists regulatory scrutiny without well-defined guidelines and regulations, financial service companies will persist in broadening their activities on an international scale.

As Genesis Trading’s report emphasizes, while the landscape remains uncertain, the second quarter of 2023 has shown that the industry is evolving. With traditional players entering the arena, the crypto realm is now being shaped not just by technological innovation, but also by the integration of established financial practices. The battle for dominance in this ‘land grab’ promises to be a defining chapter in the cryptocurrency narrative, one that will reshape the industry’s future for years to come.

FTX & Genesis Settle Claims For An Undisclosed Amount

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Defunct crypto firms FTX and Genesis have finally resolved their disputes, reaching an agreement in principle as per a letter sent by their legal representatives to Judge Sean H. Lane on July 27. While the settlement terms have not been made public, the claims were brought by FTX in its bankruptcy case.

The Parties have reached an agreement in principle, subject to documentation, regarding a settlement that would resolve, among other things, the claims asserted by the FTX Debtors against the Debtors in these Chapter 11 Cases and the claims asserted by the Genesis Debtors against the FTX Debtors in the Chapter 11 Cases.

Each firm is attempting to recover money that belongs to its own debtors. According to a court document from January, Genesis, the largest unsecured creditor of FTX and its associated entities, owes $226.3 million. However, FTX asserted that the amount is close to $4 billion after decreasing from $2 billion, a claim refuted by Genesis.

Lending platform and Digital Currency Group [DCG] subsidiary Genesis filed Chapter 11 bankruptcy in the federal court of Manhattan last year, becoming the latest to crumble in the FTX contagion and a heavy blow to the empire of DCG boss Barry Silbert.

The crypto broker named over 100,000 creditors in the “mega” bankruptcy case, with total obligations ranging from $1.2 billion to $11 billion, as per the then-bankruptcy documents.

Meanwhile, the accusation against the former founder of the crypto exchange FTX, Sam Bankman-Fried, was narrowed for the second time by federal prosecutors as they withdrew a campaign financing charge against the former CEO.

FTX Won’t Pursue Campaign Finance Charge 

Investigators informed Judge Lewis Kaplan on July 27 that they were dropping the allegation of conspiracy to make unlawful campaign contributions because the Bahamas government did not give their consent for that charge to be brought against Bankman-Fried when he was extradited from the island nation in December.

Previously, the Manhattan office of the U.S. Attorney dismissed an accusation against him for breaking anti-bribery laws on identical grounds. The actions most likely lessen Bankman-Fried’s criminal exposure. Prosecutors alleged that he and others colluded to swindle investors and clients out of billions.

Recently, a $1 billion lawsuit was brought against the indicted crypto entrepreneur and his three former associates.

Cardano’s Voltaire Era: Empowering Community Participation In CIP-1694 Discussions

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Cardano Ecosystem Community members are getting ready for the transition to the Voltaire era as they prepare to participate in a discussion of CIP-1694. The latest weekly Cardano development report revealed that community members would be able to contribute directly to GitHub and continue the conversation on various community channels.

Cardano Weekly Development: Progress & Participation

In other developments, the networking team released node v.1.35.6, which brings Dynamic P2P networking to the mainnet. This development will enable SPO relays to connect automatically to each other, replacing the current manual configuration process. 

Progress was made by the ledger team in implementing the Conway era by expanding the ledger API and adding several governance features. 

Meanwhile, the consensus team focused on the UTXO-HD prototype refactoring and the design and testing of the Genesis. They also extracted the fs-sim package, which offers a file-system abstraction layer for testing and simulation purposes. 

Additionally, they addressed a failing property test concerning iterators and continued their efforts to improve the mempool and VRF functionalities.

The Daedalus team improved the application’s starting screen to show more precise sync progress with decimals. While the Lace desktop development team improved the DApp Connector’s browser navigation and transaction drawer logic. They also finalized and implemented a simple onboarding mechanism for the local node feature.

The Adrestia team worked on extending the multi-signature feature with delegation functionality in the Cardano wallet. They also worked on extracting the transaction balancing library and refactored the DBLayer to improve performance and memory usage. Finally, they continued working on the performance optimization of Cardano-services in cardano-js-sdk.

The Marlowe team addressed multiple concerns with the validator and its specification while also introducing several new features. These include a transaction detail view for Marlowe Explorer, improved readability of ADA amounts, and a paginated index of all Marlowe contracts.

The Hydra team continued working on hydra-node mainnet compatibility, added a golden test suite for Hydra Plutus scripts, and some detection of hydra-node misconfiguration. They also established a mainnet limit of 100 ada per commit (for now) and addressed smaller tasks in preparation for the mainnet beta release. 

The Mithril team continued implementing the migration of the aggregator stores to a relational design and completed the adaptation and migration of the stake pool store.

In governance, the Cardano Project Catalyst team introduced a proposed iteration for the community assessment stage coming into Fund10. The team encourages all members to stay tuned and register attendance for the upcoming town hall. Also, the Special Voting Event introduced during this week’s 360 segments is coming soon.

Nevertheless, the Cardano development team continues to make significant strides in preparing for the transition to the Voltaire era. The community is encouraged to participate in the discussion of CIP-1694, contribute to GitHub, and join the conversation on various community channels.

Related Reading | Binance Spot Trading Halts: Swift Response & Transparent Updates Eases Customer Concerns

Gemini & Genesis Embarks On A $100M Agreement

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Gemini exchange agrees to commit up to $100 million in cash for its customers as part of a restructuring deal and recovery plan with the now-bankrupt Genesis Global Capital and parent firm Digital Currency Group.

In a court hearing held on 6th Feb., Gemini announced the agreement in principle with Genesis DCG and other creditors on a plan that provides a path for Earn users to recover their assets.

As part of this initiative, the Winklevoss twins-led trading firm, will donate up to an additional $100 million to Earn users.

It needs to be recalled that the trading firms were involved in a bitter public spat over $900 million in customer assets where both sides accused each other of perpetuating fraudulent activity, misleading accounting, and misguided public statements.

The contentious relationship had its origin way back in Dec 2020 when the two firms forged a deal to give the latter’s customers the option of lending their cryptocurrency to Genesis.

As part of the agreement, Genesis would agree to pay interest on the loans being issued.

Then in February 2021, both firms introduced the Gemini Earn program to retail investors, who then “tendered their crypto to Genesis.”

The agreement also entailed that Gemini would act as the facilitator and earn a 4.29% agent fee, and Genesis would then “exercise discretion in how to use investors’ crypto assets to generate revenue and pay interest to the latter’s Earn investors.”

Gemini Customers Filed Class Action Suits

For months, Gemini customers loaned money to Genesis for placement across various crypto trading desks. Following the FTX crash, Genesis filed for bankruptcy and was forced to temporarily shutter its operations, as well.

Withdrawals on Earn have been temporarily suspended for almost three months. Naturally, the 340k retail customers of Gemini are upset, and some of them have joined hands to file class actions against the two firms.

Even the SEC has filed a lawsuit against the two firms alleging the sale of unregistered securities, TronWeekly reported the other day.

With the latest deal hoping to bring relief for the investors, Gemini released the following statement:

This plan is a critical step forward toward a substantial recovery of assets for all Genesis creditors. It demonstrates Gemini’s continued commitment to helping Earn users achieve a full recovery.

The broader details of the restructuring plan were announced in Manhattan bankruptcy court.

Genesis’ “Mega” Bankruptcy Filing Has Liabilities Upto $11B

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Crypto lender and DCG subsidiary Genesis has filed Chapter 11 bankruptcy in the federal court of Manhattan. With this, the crypto firm has become the latest to crumble in the FTX contagion and a heavy blow to the empire of DCG boss Barry Silbert.

The crypto broker cited over 100,000 creditors in a “mega” bankruptcy case, with total obligations ranging from $1.2 billion to $11 billion., as per the bankruptcy documents.

According to reports, Genesis filed three separate petitions. One of the statements mentioned that its derivatives and spot trading, broker-dealer, and custody businesses are not included in Chapter 11 and would continue client trading operations.

Under the Chapter 11 plan, the firm contemplates potential sale and equitization transactions to enable the lending business to emerge under new ownership.

Board member at Genesis, Derar Islim, who was appointed as the firm’s interim CEO in August 2022, send out a statement:

While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all its stakeholders.

According to the press release, the firm also announced a restructuring of the lending business to advance ongoing stakeholder discussions further and optimize outcomes for both Genesis clients and Gemini Earn users.

Genesis Bankruptcy Filing Would Speed Up Funds Recovery- Gemini CEO

It needs to be told that Genesis’s parent firms DCG and Gemini were engaged in negotiations after the formerly suspended customer withdrawals in the aftermath of the FTX collapse.

Moreover, the platform-owned high-yield savings product Gemini Earn $900 million. 

According to reports, Genesis has $175 million of its assets locked in the bankrupt FTX. and is estimated to owe creditors $3 billion.

Responding to the latest news, Gemini co-founder Cameron Winklevoss tweeted that Genesis’s bankruptcy filing was a crucial step towards recovering customers’ assets.

“Bankruptcy court provides a much-needed forum for that to happen. Sunlight is the best disinfectant”, he added.

DCG Subsidiary Genesis Preps Up To File Bankruptcy

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DCG’s subsidiary Genesis might soon file bankruptcy and is reportedly in talks with creditors, according to a Bloomberg report.

The development follows after its parent firm Digital Currency Group [DCG], informed its shareholders of suspending dividends until further notice. In a letter sent to its shareholders on 18 Jan., the venture firm stated,

In response to the current market environment, DCG has been focused on strengthening our balance sheet by reducing operating expenses and preserving liquidity. As such, we have made the decision to suspend DCG’s quarterly dividend distribution until further notice.

Crypto conglomerate DCG has found itself in a tough financial spot at its once-prolific lending platform Genesis. Barry Silbert, the business’s owner, has been engaged in negotiations with billionaires Cameron and Tyler Winklevoss.

The duo-led crypto exchange Gemini offered a lending product that fell apart because Genesis, its partner, suspended customer withdrawals.

Back in November, Genesis halted withdrawals following the collapse of the crypto exchange FTX. And the platform owes high-yield savings product Gemini Earn $900 million. 

According to reports, Genesis has $175 million of its assets locked in the bankrupt FTX. and is estimated to owe creditors $3 billion.

Genesis’ Assets To Get Diluted

As its parent business Digital Currency Group came under increasing pressure, the CEO of the cryptocurrency broker asked for more time to sort out its problematic lending operation.

Both Gemini and Genesis were recently involved in a bitter public showdown after the former co-founder Cameron Winklevoss issued an open letter to DCG CEO Barry Silbert accusing him of “bad faith stall tactics.”

He claimed his firm has tried to work out a solution to getting the cash back but was unsuccessful, as reported by TronWeekly.

That said, the exact implication of a Genesis bankruptcy filing on DCG investors is now unknown, but at the very least, they will witness a diluting of their interests, according to a story in The Information.

SoftBank, one of the investors in DCG, wiped off a $100 million interest in the defunct FTX in November. Others include the CapitalG growth fund from Alphabet, Bain Capital, and Ribbit Capital.

In addition, DCG-owned crypto media outlet CoinDesk confirmed with Bloomberg that it is exploring options of partial or full sale with New York-based Lazard as a financial adviser.

SEC Implicate Gemini & Genesis For Alleged Sale Of Unregistered Securities

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Crypto firms Gemini and Genesis have been charged for the sale of unregistered securities by the US regulator SEC.

According to sources, the complaint in Manhattan federal court was filed as “the unregistered offer and sale of securities to retail investors through the Gemini crypto lending program.”

The United States regulator stated that Genesis and Gemini agreed to a deal in December 2020 to give the latter’s customers the option of lending their cryptocurrency to Genesis.

As part of the agreement, Genesis would agree to pay interest on the loans being issued.

Then in February 2021, both firms introduced the Gemini Earn program to retail investors, who then “tendered their crypto to Genesis,” according to the report.

SEC claimed that by these transactions, Gemini would act as the facilitator and earn a 4.29% agent fee, and Genesis would then “exercise discretion in how to use investors’ crypto assets to generate revenue and pay interest to the latter’s Earn investors.”

But in November of 2022, Genesis went bankrupt and said it could no longer allow Earn investors to withdraw.

SEC further accused Genesis of possessing roughly $900 million in assets from investors and that customers have not been able to withdraw their crypto, despite the Gemini Earn program shutting down earlier this month

According to the complaint filed by SEC, both firms collaborated and participated in acts that constituted the allegations of offering and selling unregistered securities.

The agency claimed both parties are responsible even though Genesis was the issuer.

Gemini and Genesis’ Relationship Went Sour

The two leading crypto firms were involved in a bitter public spat over $900 million in customer assets where both sides accused each other of perpetuating fraudulent activity, misleading accounting, and misguided public statements.

After FTX’s bankruptcy in November sparked a run for the exits throughout the crypto community, Genesis banned withdrawals. The firm has still not permitted Earn users to withdraw their money.

Representatives from Gemini and Genesis parent Digital Currency Group declined to comment.

Gemini, which was established in 2015 by Bitcoin proponents Cameron and Tyler Winklevoss, has a sizable exchange operation that, despite being in trouble, might withstand enforcement action.

Tyler Winklevoss said in a tweet that it is “working diligently to recover assets” referring to the SEC’s lawsuit as “counterproductive”, and would defend itself against “this manufactured parking ticket.”

Gemini Founder Accuses Genesis of Concealing $1.2B Loss in Open Letter

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In a recent open letter, the founder of Gemini accused the Genesis trading platform of losing $1.2 billion in the 3AC accident and concealing the loss from both Gemini and Digital Currency Group (DCG) users.

The letter also called for the removal of Barry Silbert from his position as head of Genesis and for a new leadership team to be put in place.

Cameron Winklevoss, CEO of Gemini, alleged that Silbert’s trading platform had loaned $2.36 billion in assets to a hedge fund that failed, resulting in a loss of at least $1.2 billion. He accused Silbert of not taking proper action to address the loss, either through restructuring or filling the deficit.

When the loss from 3AC occurred, the total amount of loans held by Genesis was approximately $8 billion. Therefore, the $1.2 billion loss from 3AC represented approximately 15% of the total assets in the loan book.

According to the letter:

Beginning in early July 2022, Barry, DCG, and Genesis embarked on a carefully crafted campaign of lies to make Gemini, Earn users, and other lenders believe that DCG had injected $1.2 billion of actual support into Genesis. 

Genesis & Its Open Lies

Winklevoss’s open letter pointed out a number of lies, which some are, on July 6th, Michael Moro, who was the CEO of Genesis at the time, tweeted that DCG had assumed certain liabilities of the trading platform related to 3AC to ensure that they had the capital to operate and scale the business for the long term.

However, in the open letter, Winklevoss alleges that this statement was “false and misleading” and that DCG had not provided any funding to Genesis to ensure that it could operate.

In internal communications, several individuals involved lied and covered up the truth about the extent of the losses from 3AC in both of Silbert’s companies.

For example, the Head of Trading and Lending of the trading platform sent an email with a document titled “Three Arrows Post-Mortem” to multiple Gemini employees.

The document falsely stated that the losses were absorbed by DCG, leaving the platform with adequate capitalization to continue business as usual. But it’s said by Winklevoss that, in reality, DCG had not absorbed the 3AC losses on its balance sheet.

In the end, the founder of Gemini demanded:

the Board remove Barry Silbert as CEO, effective immediately, and install a new CEO, who will right the wrongs that occurred under Barry’s watch. Genesis lenders, including Earn users, have been seriously harmed and deserve a resolution for the recovery of their assets

Related Reading | Seeking Plea Bargains: Former FTX Engineering Chief Talks to U.S. Federal Prosecutors

DCG & Genesis Under Investigation By US Authorities: Bloomberg’s Report

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US authorities are reportedly investigating the financial dealings of Digital Currency Group (DCG) and its subsidiary Genesis which offers crypto lending services, Bloomberg reported on January 6th, citing people familiar with the matter told.

The person requested anonymity because the investigation has not been publicly disclosed. He told Bloomberg that Federal prosecutors in Brooklyn are examining the transfers between DCG and its subsidiary, as well as the information provided to investors about those transactions.

Additionally, according to the report, Federal prosecutors and the Securities and Exchange Commission are investigating Digital Currency Group and its subsidiaries. The probes are in the early stages, and no wrongdoing has been alleged.

This action was taken shortly after DCG revealed that it had to shutter its wealth management division, known as HQ, by the end of the month. It is due to the persistent bear market in cryptocurrency and the difficult economic climate, as reported by TronWeekly. Additionally, Genesis’ brokerage division was cutting off almost 30% of its workforce. 

Whereas DCG’s founder, Barry Silbert, has recently faced public disputes with Gemini’s founder Cameron Winklevoss. Winklevoss has accused Silbert of delaying efforts to resolve the issue and claimed that his companies are “beyond commingled.”

DCG And Genesis In Trouble

According to Bloomberg, a DCG spokesman was directed by Silbert to respond to a comment request and claimed:

DCG has a strong culture of integrity and has always conducted its business lawfully. We have no knowledge of or reason to believe that there is any Eastern District of New York investigation into DCG.

On the other side, Genesis stated that it does not comment on specific legal or regulatory matters but maintains regular communication with regulatory bodies when it receives inquiries.

Furthermore, none of the legal authorities have yet commented. However, Bloomberg stated, “it’s unclear specifically which intercompany activity is drawing scrutiny.”

Nevertheless, according to a report by Bloomberg, the investigation into Barry Silbert’s business empire began before the recent problems at cryptocurrency exchange FTX, in which Silbert is also involved. This information comes from a source familiar with the criminal probe.