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Under the proposed restructuring plan, Genesis creditors can expect an 80% recovery
According to a Genesis creditor, the latest suggested restructuring agreement between Genesis, Digital Currency Group, and creditors will result in creditors receiving at least 80% of their funds back. Genesis Global said on February 6 that it has struck an “in principle agreement” with Digital Currency Group (DCG) and its creditors, which will eventually result in the sale of its crypto trading and market-making business as part of restructuring efforts. DCG would contribute its stake in Genesis Global Trading, Genesis’ brokerage arm, to Genesis Global Holdco, Genesis’ holding company. All Genesis-related entities would be consolidated under the same holding company as a result of the deal.
The agreement calls for DCG to exchange a $1.1 billion promissory note due in 2032 for redeemable preferred stock. It will also restructure and make payment to creditors its existing 2023 term loans totaling $526 million. The accord also calls for cryptocurrency exchange Gemini to contribute $100 million to Gemini Earn users whose funds have been locked by the bankrupt corporation. Pending the completion of these transactions, which require court approval, Genesis will attempt to sell its then-owned Genesis Global Trading company.
According to Reuters, Genesis’ lawyer, Sean O’Neal, made the remarks at a Jan. 23 initial hearing in the United States Bankruptcy Court for the Southern District of New York. He added that Genesis had “some measure of optimism” that it will resolve its creditor problems before the end of the week. “Sitting here right now, I don’t think we’re going to need a mediator,” he stated. “I’m an eternal optimist.” Genesis declared Chapter 11 bankruptcy on January 19. It already had a restructuring plan in place, as well as a strategy for seeking a “sale, capital raise, and/or an equitization deal” so that it might potentially “emerge under new ownership.” The bankruptcy comes over two months after Genesis banned withdrawals in November, citing market instability caused by FTX’s bankruptcy.
The Genesis creditor and crypto yield platform Donut announced in a user update on February 6 that the scheme “has a recovery rate of about $0.80 every dollar deposited, with a path to $1.00” for Genesis creditors. It went on to say that the recoverable amount is determined by the “equity note, realized liquidation prices, and the unknown expenditures linked with the balance of this bankruptcy.” Genesis is currently revamping as part of its Chapter 11 bankruptcy procedures, which are the result of a liquidity problem caused by the bankruptcy of crypto exchange FTX in November.
At the time, Genesis Global Trading was not included in the company’s Chapter 11 filing, with Genesis Global Holdco stating that the business will “maintain client trading operations.” Genesis lawyers stated during an initial bankruptcy hearing in January that the company was hoping for a rapid resolution to its creditor disputes and expressed optimism that the company would be out of Chapter 11 proceedings by late May.
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