Gemini considers forbearance after DCG misses $630 million repayment
|Get all the essential market news and expert opinions in one place with our daily newsletter. Receive a comprehensive recap of the day's top stories directly to your inbox. Sign up here!|
(Kitco News) - The Digital Currency Group (DCG) has reportedly missed a $630 million repayment that was due to the Gemini cryptocurrency exchange last week, leading the exchange to consider the option of forbearance against the DCG in an effort to help accommodate the process.Gemini noted the missed repayment in the most recent status update on its Earn program, the exchange's embattled crypto lending platform that was forced to halt redemptions when Genesis, which held a considerable amount of the funds invested into Earn, declared bankruptcy in January.
"Digital Currency Group, Inc. (DCG), the parent company of Genesis Global Capital, LLC (Genesis) did not pay the approximately $630 million that came due last week," the update from Gemini said. "Genesis, the Unsecured Creditors Committee (UCC), the Ad Hoc Group of Creditors (AHG), and Gemini are considering whether to provide a forbearance to DCG to avoid a DCG default."
Under forbearance, lenders grant borrowers a temporary reduction or pause in payments to help them get their financial matters in order. Eventually, the borrower must repay all reduced or missed payments.
According to Gemini, forbearance will be considered in the case "based in part on whether the parties believe DCG will engage in good faith negotiations on a consensual deal." In the event that a deal is unable to be reached, Gemini plans to work with Genesis to "suggest terms for an amended plan of reorganization that could be advanced without DCG's consensual participation."
To prepare for this possibility, Genesis filed a motion on Friday with the Bankruptcy Court seeking to extend its period of exclusivity to propose such a plan.
Gemini has also prepared its "Gemini Master Claim," which the exchange is required to file by the end of business on Monday. The new master plan "seeks the return of over $1.1 billion in digital assets that Genesis has refused to return to the 232,000 Earn users who had active loans as of January 19, 2023."
According to the original court filing, Genesis owes over $3.5 billion to its top 50 creditors, including Gemini, Cumberland, Mirana, MoonAlpha Finance and VanEck's New Finance Income Fund.
A spokesperson for Genesis provided the following comment to Kitco Crypto in regard to the missed payment: “Genesis and its creditors, represented by the Official Committee of Unsecured Creditors, the Ad Hoc Group of Genesis Lenders, and Gemini Trust, are working collaboratively to address Digital Currency Group’s nonpayment of approximately $627 million in dollars and BTC that was due last week during the ongoing mediation period. Among other things, as part of the ongoing mediation process, the parties are discussing potential terms of forbearance, a standalone chapter 11 plan for Genesis and other options to recover assets and maximize value to stakeholders.”
In February, the DCG reached an "agreement in principle" with its creditors, and Gemini submitted a full settlement to the bankruptcy court, which outlined that Earn users would be able to recover approximately $0.80 for every dollar deposited. Genesis creditors eventually increased their demands, which led to a collapse in the initial settlement plans.
The new master claim filed by Gemini on Monday is intended to replace the previous settlement plan and seek the return of more than $1.1 billion worth of digital assets Genesis owes to Gemini Earn's users.
According to an update posted by the DCG on May 9, the company "continues to be engaged with the various stakeholders in the Genesis Capital restructuring process pursuant to the 30-day mediation period entered into by all parties on May 1," and is also "in discussions with capital providers for growth capital and to refinance its outstanding intercompany obligations with Genesis" in an effort to "provide further financial flexibility."