Bankrupt crypto lender Genesis and its parent company Digital Currency Group have proposed a remuneration deal that could potentially benefit over 230,000 retail creditors who used Gemini’s Earn program. The proposal is subject to a vote later in the year.
If the proposed deal is approved, Gemini Earn users are estimated to recover approximately 95-110% of their claims. Additionally, DCG’s bankruptcy plan outlines a potential path for unsecured creditors who could receive between 70% to 90% of their owed amount in USD, and in-kind recoveries could range from 65% to 90% based on the asset allocation. However, Gemini claims that the plan lacks clarity and crucial information, which raises concerns.
The Earn program was offered to customers of Gemini, the cryptocurrency exchange run by the Winklevoss twins, with Genesis providing the financial infrastructure. However, the Earn accounts were frozen after its main lending partner enacted a similar freeze before going bankrupt.
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.
“If Gemini were to agree to provide $100 million to Gemini Earn users under the Proposed Agreement, as it previously did, there would be little doubt Gemini Earn users would receive more than full recovery,” the filing states.
Earlier in April, Gemini received a personal $100-million loan from its founders. However, it was not clear whether the $100 million loan and the $100 million Earn commitment from Gemini are related or two separate initiatives. The loan was reportedly made by the Winklevoss twins to fund Gemini amid the crypto market downturn, while the Earn commitment was announced as part of the restructuring deal and recovery plan.
An executive from Digital Currency Group told CoinDesk that depending on how the bankruptcy claim is calculated, Gemini Earn customers are estimated to receive between $440 million and $765 million of a claim. These customers are also expected to receive distributions ranging from $400 million to $535 million. Additionally, they will have access to the $600+ million worth of collateral that Gemini is holding. As a result, they are potentially looking at total recoveries exceeding a billion dollars, which aligns with their total claim, essentially achieving a full recovery for current customers under these scenarios.