Bankrupt crypto lender Genesis and its parent company Digital Currency Group have reached an agreement that includes a viable restructuring plan with Gemini, the cryptocurrency exchange founded by the Winklevoss twins.
Genesis attorney Sean O’Neal told a U.S. bankruptcy judge that the agreement will see Barry Silbert-owned DCG exchange its outstanding $1.1 billion note due in 2023 for convertible preferred stock. The deal is part of Genesis’ bankruptcy plan agreed with its creditors that entails DCG refinancing its current 2023 term loans through new term loans issued in two tranches with an aggregate total value of approximately $500 million.
Under the new restructuring agreement, this arrangement would either result in a sale of Genesis or turn over its equity to creditors, effectively bringing all entities under the same holding company. Additionally, Gemini will contribute up to $100 million to compensate Earn users with frozen assets and ensure that they will fully recover their funds.
Owing creditors at least $3.4 billion, Genesis had already halted most activity on its platform and froze customer redemptions on November 16, citing a liquidity crunch triggered by significant exposure to FTX. Genesis spent the past two months seeking at least $1 billion in fresh capital, including rumors over a potential investment from Binance, but the funding failed to materialize.
“I am grateful to the talented team at Genesis for their ongoing dedication and commitment to client service, and excited about working together to build Genesis for the future. I also want to express my deep appreciation to all of our clients for their continued patience and loyalty as we work through a resolution for our lending business,” said Derar Islim, Interim CEO at Genesis.
4/ We have been working around the clock since November 16, 2022 to reach this milestone. We greatly appreciate the support and patience of Earn users during this time. This has allowed us to maximize our efforts on your behalf.
— Cameron Winklevoss (@cameron) February 6, 2023
Gemini co-founder Cameron Winklevoss added there is still much work to be done to complete this process, including further due diligence of Genesis financials and judicial approval of this plan, but “we are confident that we now have a framework in place to execute on.”
The lending unit of Gemini suspended redemptions and new loans in November due to the collapse of FTX crypto exchange. The move raised questions about the health of Gemin’si program that holds more than $900 million in customer money. The Earn accounts were frozen after its main lending partner, Genesis Global Capital, enacted a similar freeze before going bankrupt.
