By
Bena Ilyas
March 19th, 2024
In addition to the partial repayment agreement, DCG has also committed to paying an additional $275 million, disbursed in four installments after the date of the initial partial repayment.
In a welcome development that has sent ripples through the crypto space, creditors of the defunct Genesis platform are set to receive a remarkable 90% recovery on their outstanding locked funds. This development comes in the wake of an apparent in-principle agreement between Digital Currency Group (DCG) and Genesis creditors to resolve the complex entanglement of claims arising from Genesis’ bankruptcy.
A recent report from Coindesk indicated that this promising move was disclosed in a court filing earlier today, potentially marking a turning point in the intricate landscape of digital asset insolvencies.
The Dual Dimension Approach to Potential Recovery
The filing highlights that unsecured creditors stand to benefit greatly from the deal, with the potential for recovery ranging from 70% to 90% of the total due amount in USD. This idea gives creditors a ray of optimism since it implies that a significant percentage of the financial loss could be minimized.
Additionally, the agreement outlines potential recovery scenarios on an in-kind basis. Depending on the denomination of the digital asset involved, creditors could witness recoveries ranging from 65% to 90%. This in-kind recovery structure acknowledges the unique nature of digital assets and their fluctuating values, aiming to create a fair and balanced distribution of resources.
The genesis of this complex situation traces back to November when the failure of FTX, a major crypto exchange, set off a series of events that ultimately led to Genesis’ woes. Following FTX’s downfall, Genesis’ lending business faced significant challenges, prompting the suspension of withdrawal services.
The situation further escalated as customers who were entwined with a lending product offered by the Gemini exchange found themselves adversely impacted. The compounding financial strain eventually forced Genesis to seek bankruptcy protection in January this year.
The Way Forward for DCG
The bankruptcy filing, submitted to the US Bankruptcy Court for the Southern District of New York, revealed that Genesis was in the red by over $3.5 billion, with a list of creditors that included major players such as the Gemini crypto exchange, trading giant Cumberland, Mirana, and MoonAlpha Finance.
Against this backdrop, DCG’s announcement that it was on the brink of reaching an in-principle agreement to address the claims offered a glimmer of optimism. The recent court filing has shed more light on the specifics of this potential resolution.
The deal appears to pivot on a new partial repayment agreement, a step aimed at satisfying DCG’s outstanding liabilities, which stand at approximately $630 million in unsecured loans due in May 2023 and $1.1 billion under an unsecured promissory note due in 2032. The repayment plan is intended to be carried out in two tranches. The first tranche, worth approximately $328.8 million, has a two-year maturity date. The second tranche, which is much larger at $830 million, will mature in seven years.
In addition to the partial repayment agreement with Genesis, DCG has also committed to paying an additional $275 million, disbursed in four installments after the date of the initial partial repayment.