Digital Currency Group (DCG) missed a $630 million payment that was due the week of May 9 to its subsidiary, bankrupt Genesis Capital, as revealed by crypto exchange Gemini.
Following Genesis’ bankruptcy, the problematic crypto company has frequently been at the heart of legal disputes between DCG and Gemini. DCG and Genesis apparently owed approximately $900 million to Gemini’s clients who had their Earn funds frozen – Genesis operated the scheme in collaboration with Gemini.
Genesis, Gemini, and other creditor organizations, notably the Unsecured Creditor Committee (UCC) and the Ad Hoc Group of Creditors (AHG), are presently debating whether to grant DCG forbearance in order to avert a default.
“Consideration will be based in part on whether the parties believe DCG will engage in good faith negotiations on a consensual deal,” said Gemini.
This comes after DCG has revealed it has no solution to its “outstanding intercompany obligations” that could help reimburse creditors.
After a “subset of creditors” walked away from a restructuring plan signed in February, Genesis’ creditors agreed earlier this month to a request for a 30-day mediation period and a court-appointed mediator.
In February, the firm offered a settlement proposal in which Genesis creditors were projected to obtain an 80% recovery of funds after the firm filed for Chapter 11 bankruptcy.
The UCC allegedly presented new terms after analyzing different intercompany loans made between Genesis businesses and DCG prior to Genesis’s withdrawal freeze last year.
If a forbearance deal cannot be achieved, Gemini intends to negotiate with Genesis on the terms of a new proposal that may be launched without DCG’s consent. To that end, Genesis filed a motion on Friday with the bankruptcy court to extend the period of exclusivity to propose this plan.
If the court rules in their favor, they will have until August 27 to file a proposal, and Gemini will have until October 26 to accept it.
Gemini also wants to submit a claim with Genesis for the recovery of $1.1 billion to 200,000 Earn customers who have current loans as of January 19.
Genesis stated in its original Chapter 11 filing that it intended to sell its assets at auction and exit bankruptcy on May 19.
Genesis owes nearly $3.5 billion to its top 50 creditors, which include Gemini, Cumberland, Mirana, MoonAlpha Finance, and VanEck’s New Finance Income Fund, according to a January court filing.
Information for this briefing was found via Unchained and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.