Genesis Rebound? DCG Agrees to In-Principle Deal Offering Up to 90% Recovery

Digital Currency Group (DCG) has entered into an in-principle agreement with the creditors of its cryptocurrency lending subsidiary, Genesis. This agreement could reportedly pave the way for substantial recoveries, ranging from 70% to 90% in USD equivalent for unsecured creditors.

The recent court filing on August 29, 2023, outlines a compelling prospect for creditors of Genesis. This includes the potential for 65% to 90% recovery on an in-kind basis. However, the prospective recoveries are contingent upon the denomination of the digital assets.

Recovery Prospects for Genesis' Creditors

Additionally, to address the existing liabilities, DCG has reportedly devised a structured repayment plan. With around USD $630 million in unsecured loans due in May 2023 and USD $1.1 billion under an unsecured promissory note due in 2023, DCG's strategy involves a partial repayment agreement.

According to the court documents, this agreement encompasses two tranches: the first totaling approximately USD $328 million with a two-year maturity period; and the second summing up to USD $830 million with a seven-year maturity. The calibrated approach aims to streamline the repayment process and mitigate the financial strain.

Besides that, DCG's resolution includes a provision for further payments. The agreement indicates that DCG would disburse USD $275 million in four instalments subsequent to the partial repayment agreement as part of the May 2023 maturities.

Genesis, the crypto lending arm, faced instability following the collapse of FTX. This led to its suspension of withdrawals and eventual bankruptcy protection filing in early 2023. This tumultuous journey has culminated in DCG's in-principle agreement, which is expected to resolve the claims that have plagued Genesis for months.

Genesis' Troubled Path

Recently, Finance Magnates reported that DCG had sought a dismissal of Gemini's fraud allegation. The dispute focuses on Gemini's Earn program, which allowed retail customers to earn interest by lending their cryptocurrencies to Genesis. The collapse of 3AC in June 2022 and the subsequent ripple effects, including the downturn of FTX, adversely impacted Genesis' operations.

"Debtors, DCG, and UCC have reserved rights with respect to the 3AC-related liabilities, and any potential claims the debtors or DCG have against the other party with respect to the 3AC's liabilities are fully preserved," the latest court filing stated.

In July, the cryptocurrency exchange, Gemini sued Digital Currency Group (DCG) and its CEO, Barry Silbert. The lawsuit, filed in the New York court, contends that both parties were involved in 'encouraging and facilitating' fraudulent activity through Genesis.

However, in response to the lawsuit, DCG dismissed Gemini's claims as a 'publicity stunt' orchestrated by Cameron Winklevoss, Gemini's Co-Founder. DCG firmly denied any wrongdoing, asserting that the accusations were baseless and defamatory.