The creditors of bankrupt cryptocurrency lender Genesis are dissatisfied with the recent in-principle settlement agreement involving various parties, including Digital Currency Group (DCG).
In response to a public update on the bankruptcy plan released on August 29, an ad hoc group of lenders from Genesis Global Capital (GGC) expressed dissatisfaction with the reached in-principle agreement, deeming it “wholly insufficient.”
The update announced that DCG had agreed in principle with Genesis’ unsecured creditors (UCC) and debtors, proposing recoveries equivalent to 70% to 90% in U.S. dollars. However, neither the ad hoc group nor the Gemini exchange supported the in-principle deal mentioned in the update.
The ad hoc group clarified that they do not endorse the proposed agreement by DCG, asserting that DCG’s contribution falls short of satisfying the loan amounts. They argued that the debtors and UCC are not fulfilling their fiduciary duties to maximise creditor recoveries, suggesting they are attempting to move on from the situation. The filing stated:
“The Ad Hoc Group, which includes dozens of creditors for whom these assets are critical, does not have such luxury and cannot support the proposed terms of the plan update which permit DCG to walk away untouched and, in fact, paying less than already committed.”
Moreover, the Genesis lenders contended that DCG should not be granted non-consensual third-party releases, which release non-debtor parties from liability to other non-debtor parties without the consent of all potential claim holders.
They further argued that the debtors and UCC are attempting to improperly secure the release of third-party claims against DCG and its related parties. The lenders highlighted that DCG’s contributions are significantly lower than owed, stating:
“Instead of receiving $630 million that matured and should have been paid 3 months ago, DCG will only be paying $275 million now and will pay another $328.8 million in another 2 years.”
Given the circumstances, the lenders concluded that these contributions could not be considered substantial enough to warrant releases from estate claims, let alone third-party creditor claims.
Genesis was among the cryptocurrency lending companies affected by the crypto winter 2022. Following a liquidity crisis in November 2022 that led to suspending withdrawals, the lender filed for bankruptcy in January 2023. The firm reportedly owed over $3.5 billion to its top 50 creditors, including Gemini.