TronWeekly

Crypto World News

You are here: Home / Archives for Genesis

Genesis

Gemini & Genesis Embarks On A $100M Agreement

by

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

by

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

by

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

by

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

by

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

by

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.

Genesis Parent Firm DCG Closes Wealth Management Division Amid Market Slump

by

Digital Currency Group (DCG), the parent company of Genesis, has closed its wealth management division named HQ due to the ongoing slump in the cryptocurrency industry and challenging economic conditions, as reported by The Information.

DCG confirmed the closure in an email stating that the division would close its doors on January 31st. The DCG representative said:

Due the state of the broader economic environment and prolonged crypto winter presenting significant headwinds to the industry, we made the decision to wind down HQ, effective January 31st.

DCG and its subsidiary Genesis are facing challenges following the recent collapse of major crypto exchange FTX. Genesis has been seeking additional funding for its lending unit, but some investors have been hesitant due to its connections to other entities within DCG.

Genesis Cut Headcount By 30%

Genesis Trading, the crypto lending arm of Digital Currency Group (DCG), has reportedly cut 30% of its workforce due to financial difficulties and the threat of bankruptcy. 

The company, which is led by Barry Silbert and includes Grayscale Bitcoin Trust and mining company Foundry, has already laid off 20% of its employees and replaced its CEO. 

According to the anonymous source—who requested anonymity since the figures are private—about 60 positions were cut. There are now about 145 employees at the company.

The fresh round of cuts comes after the market turmoil of 2022 and the bankruptcy of Three Arrows Capital, as well as the collapse of crypto exchange FTX and hedge fund Alameda Research, both of which were major clients of Genesis. 

After FTX filed for bankruptcy protection, the company hired bankruptcy attorneys, requested a $1 billion emergency loan, and stopped all redemptions from clients, as per a report by The Wall Street Journal.

Due to the redemption freeze, Silbert has received criticism. Earlier this week, as reported by TronWeekly, CEO Cameron Winklevoss of crypto exchange Gemini, a Genesis client, accused Silbert of “bad faith” tactics.

Winklevoss has asked Silbert to publicly commit to finding a solution to the current problem by January 8th, 2023, and to treat the $1.1 billion promissory note as an obligation to pay $1.1 billion.

Gemini Founder Calls Out DCG’s Founder For Mishandling $900M

by

Wu Blockchain reported on December 2nd that Cameron Winklevoss, the founder of Gemini, has written an open letter to Barry Silbert, the founder of Digital Currency Group (DCG).

The letter expressed concern about the 340,000 EARN users who have been unable to withdraw their funds, totaling $900 million, for 47 days. Winklevoss has asked Silbert to commit publicly to addressing this issue.

Winklevoss emphasized in his letter that the 340,000 EARN users affected by the withdrawal issue are not just anonymous entities but real people with real stories. He gave the examples of a single mother who had lent money for her son’s education and a father who had lent money for his son’s bar mitzvah.

Winklevoss pointed out that these individuals have entrusted a total of more than $900 million of their assets to DCG and therefore deserve concrete answers to their questions and concerns.

According to Gemini’s founder, for the past six weeks, he and his team have been trying to engage with Silbert and DCG in a collaborative manner to find a mutually agreed-upon solution for repaying the funds while also helping Silbert preserve his business.

Winklevoss has accused Silbert of engaging in bad-faith stall tactics. On December 2nd, the Gemini founder suggested that the most productive way to reach a resolution would be to bring everyone together in the same room as soon as possible. 

Silbert had agreed, but only on the condition that there be a proposal on the table first. Winklevoss stated that a proposal was delivered to Silbert on December 17th and an updated version on December 25th. However, Silbert has continued to refuse to meet with them in person to work toward a resolution.

Gemini Founder Gives Deadline

Gemini Founder clarified that the current issue is entirely the responsibility of Silbert and DCG. According to him, DCG owes a total of $1.675 billion to Genesis. This debt consists of money that Genesis owes to EARN users and other creditors.

Winklevoss accused Silbert of using funds entrusted to him by schoolteachers and others for his own benefit through greedy share buybacks, risky investments, and speculative trades that increased the fee-generating AUM of his trust. 

Winklevoss has asked Silbert to publicly commit to finding a solution to the current problem by January 8th. He also emphasized that they are willing to work with Silbert, but that time is running out.

Gemini Founder Vs. DCG Founder

Barry Silbert responded to these accusations on Twitter, stating that DCG did not borrow $1.675 billion from Genesis, has never missed an interest payment to Genesis, and is current on all loans. 

He also claimed that DCG delivered a proposal to Genesis and their advisors on December 29th and has not received any response. 

In response to Silbert’s statement, Winklevoss accused him of trying to portray himself and DCG as innocent parties with no responsibility for the current situation. 

Winklevoss pointed out that if DCG did not borrow the money, then how does it owe Genesis $1.675 billion? He suggested that the answer lies in the existence of a promissory note.

Furthermore, Winklevoss has asked Silbert to publicly commit to finding a solution to the current problem by January 8th, 2023, and to treat the $1.1 billion promissory note as an obligation to pay $1.1 billion. But Silbert did not yet respond.

Related Reading | XRP, SOL, And Others Have “Always” Been Securities- Chia’s COO 

Gemini Creditor Committee Unveils Plan to Address Cash Flow Problems

by

According to Gemini co-founder Cameron Winklevoss in a tweet, a creditor committee that includes Gemini has offered Genesis and Digital Currency Group a plan to “provide a path for the recovery of assets.”

At the height of the bull market in February 2021, Gemini teamed up with Genesis to launch Gemini Earn, which provided customers with up to 7.4% interest on their cryptocurrency deposits. Given the market turbulence brought on by FTX in mid-November, Genesis stopped allowing withdrawals, locking Gemini Earn funds in the process.

Amanda Cowie, vice president of communications and marketing at DCG, at the time said,

“This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion……This decision impacts the lending business at Genesis and does not affect Genesis’s trading or custody businesses. Importantly, this decision has no impact on the business operations of DCG and our other wholly owned subsidiaries.”

Genesis Reportedly Owes Gemini $900M

According to a person familiar with the situation, customers who have money locked up on the trading and lending site Genesis and who have sought legal counsel in the matter are currently responsible for about $1.8 billion in loans. And it appears that number will keep rising.

According to a recent Financial Times investigation, a group of consumers utilizing Genesis-affiliated cryptocurrency exchange Gemini’s Earn program were due $900 million when the loan division of Genesis stopped allowing customer withdrawals on November 16.

Proskauer Rose is representing the second set of unrelated Genesis creditors, whose loans total $900 million as well, a second source informed the media.

The Proskauer group brings the total to $1.8 billion, and a third ad hoc group, which is being represented by Kirkland & Ellis, the legal team for insolvent cryptocurrency companies Celsius Network and Voyager Digital, is expected to add more, the second source said. It is unknown how much money this third group owes in loans. The second person indicated that the law firm Latham & Watkins is also representing the Gemini customers group.

In a letter to investors on Nov. 23, Genesis said,

“It had begun discussions with potential investors and our largest creditors and borrowers, including Gemini and DCG [Digital Currency Group], to agree on a solution that shores up our lending business’ overall liquidity and addresses clients’ needs.”

Genesis V.s DCG Bankruptcy: Creditors To Make A Difficult Choice

by

On December 11th, the founder of the crypto research company Messari, Ryan Selkis, tweeted that Dragonfly Capital’s Managing Partner, Haseeb Qureshi, had made an unexpected remark on “the $1.1 billion DCG-Genesis promissory note.”

On the latest episode of Unchained’s “The Chopping Block,” Haseeb Qureshi talked about the potential repercussions of Genesis going out of business. He claims that in the case of a Genesis liquidation, the 10-year note may have been structured as “callable.”

Ryan stated in his Twitter thread that if true, despite the fact that the promissory note was designed to be paid off over ten years, the crypto lending company may have considered it a “current asset” with a shorter lifespan. If Genesis had shown creditors a list of current assets, that would have made up a significant portion of it.

According to the tweet’s comment section:

It would also do two other things: + significantly reduce DCG’s ability to limit liability from a Genesis bankruptcy. a callable promissory note would basically be a “you break it, you buy it” situation + reduce Genesis’s urgency to file bankruptcy as they “have the assets.”

In Ryan’s opinion, this would allow the company’s creditors to decide whether or not they want to take them into bankruptcy through a notice of default. Since it would be much easier legally to drag DCG into bankruptcy over a present asset than a 10-year note, the leverage would shift to its creditors.

In this case, it would be highly probable that DCG pursues a recapitalization versus bankruptcy proceedings for the lender company. If the promissory note is indeed callable, then DCG’s odds of success in bankruptcy court would plummet. He also pointed out that “the lengthy silence could be a sign Genesis creditors are giving DCG time to figure it out.”

$1.1 billion DCG-Genesis Promissory Note

Investors have been concerned about the contagion spreading to the whole crypto sector since FTX’s abrupt. Lenders have ceased making loans, withdrawals are more challenging and uncontrolled, and the value of a number of tokens has plummeted.

The chief executive of Digital Currency Group (DCG), Barry Silbert, revealed in a letter that his business owes its subsidiary Genesis Global, the crypto lender (halted withdrawals and new loans), a loan of $575 million and a promissory note of $1.1 billion.

According to the letter’s statement, after DCG took over the lending company’s exposure from the Three Arrows Capital default, the $1.1 billion promissory note was issued.

Separately, the roughly $575 million that DCG borrowed from it was used to finance business ventures and purchase shares of DCG from outside stockholders, as per Mr. Silbert’s letter. He claimed that the loans were market-rate, arm’s-length agreements.

He also discussed Genesis’ lending operations and noted that the November 16th suspension of redemptions and new loan originations was due to a liquidity and term mismatch in the loan book. 

Related Reading | Genesis Block A Front For Alameda Research – New Evidence