Gemini will contribute $100 million to Genesis’ bankruptcy recovery plan
Cameron and Tyler Winklevoss.
Adam Jeffery | CNBC
Crypto exchange Gemini will contribute up to $100 million in cash, earmarked for its clients, as part of a deal with bankrupt Genesis Global Capital and parent company Digital Currency Group, Genesis’ lawyers said in a court hearing on Monday.
The restructuring agreement and recovery plan were announced during a status conference call for crypto lender Genesis, which filed for bankruptcy protection in New York on January 19. Genesis owed its creditors, including Gemini and its users, billions of dollars.
Gemini, founded by Cameron and Tyler Winklevoss, had been engaged in a high-profile back-and-forth with Barry Silbert, who owns DCG. The Winklevoss twins have publicly blamed Silbert’s mismanagement of Genesis for problems with one of their own products called Earn, which promoted returns of up to 8% on customer deposits.
“This plan is a critical step forward toward a significant recovery of assets for all Genesis creditors,” Gemini told its users in correspondence seen by CNBC. It demonstrates “Gemini’s continued commitment to helping Earn users achieve full recovery.”
The broader details of the restructuring plan were announced in Manhattan bankruptcy court. The agreement, cut between Genesis, DCG, Gemini and Genesis’ numerous creditors, is largely based on a refinancing of Genesis’ loan to DCG. Genesis loaned over $500 million in cash and bitcoin to DCG, in part to fund founder Silbert’s venture investments.
DCG will also contribute to Genesis “all equity” in Genesis’ trading subsidiary, which remained operational during the bankruptcy. In addition, DCG will provide a two-tranche debt facility, due in June 2024, with 11% interest on one tranche, and a 5% interest-paying bitcoin tranche, “roughly equal to about $500 million,” a Genesis lawyer said.
DCG will also issue convertible preference shares to Genesis creditors.
DCG also extended a $1.1 billion promissory note to Genesis after the collapse of crypto hedge fund Three Arrows Capital. The Winklevoss brothers called that maneuver “a complete gimmick that did nothing to improve Genesis’ immediate liquidity position or make its balance sheet solvent.”
As part of the recovery plan, that promissory note will be liquidated, meaning it will be converted into something of substantial value, typically equity, CoinDesk reported.
“Thank you for trusting us during this challenging time,” Gemini said in its message to users.
For months, Gemini customers borrowed money Genesis for placement across different crypto trading desks. When Genesis halted its lending operations following the collapse of FTX in November, Gemini Earn was also forced to close its operations temporarily.
All withdrawals on Earn have been paused for almost three months. Gemini’s 340,000 retail customers are angry, and some have come together in class-action lawsuits against Genesis and Gemini.
The Securities and Exchange Commission complaint was filed against both Gemini and Genesis on January 12, for allegedly selling unregistered securities in connection with a high-yield product offered to depositors.
SEE: Crypto broker Genesis files for Chapter 11 bankruptcy
