Gemini backs DCG’s push for pre-litigation settlement

Digital Currency Group (DCG), Genesis, the creditors’ committee of the crypto-lending platform, and Gemini have agreed to launch a 30-day mediation process. Representatives of the exchange expressed disappointment at the timeline.

2/ Gemini is supportive of mediation and working with the parties to bring this to a conclusion. We have also expressed our frustration on the record on the pace of progress among the parties and the need for urgency. The next status conference with the Court will be on May 4th.

— Gemini (@Gemini) April 30, 2023

«We […] are disappointed with the pace of progress between the parties and have called for urgent action. The next status conference with the Court will take place on May 4», the company said.

Parties are seeking an amicable settlement on the February 2023 Genesis’s agreement with creditors, under which the creditors would be able to recover 80% of the funds lost.

The settlements envisage a gradual write-off of Genesis’s loan portfolio and the sale of insolvent entities. Among the conditions is also the refinancing of outstanding loans that DCG received from its subsidiary, worth about $500 million in fiat and about $100 million in Bitcoin.

The agreement includes recognition of a 10-year note for $1.1 billion, issued by Genesis’s parent company, as part of equity. Financial support for the group’s lending business was needed after the June 2022 bankruptcy of the crypto hedge fund Three Arrows Capital.

The process of pre-litigation mediation envisages two meetings by May 8. Gemini expects to reach a settlement by then, as the DCG’s obligations to Genesis creditors totaling $630 million come due from May 9 to 11.

«If Digital Currency Group is unable to pay off and/or restructure its debt, the holding company risks failing to meet its obligations. While mediation is planned for up to 30 days, the parties are expected to work expeditiously to reach an agreement in the near term», Gemini said.

On April 25, 2023, the Genesis creditors group rejected the February 2023 agreed deal on restructuring the crypto-lending platform and put forward new demands. DCG warned that the decision would prolong the legal process.

Earlier, on November 16, 2022, Genesis Global Capital froze withdrawals and the issuance of new loans. The firm cited heightened client requests following the collapse of FTX.

In January 2023, Genesis Global Holdco and its subsidiaries Genesis Asia Pacific and Genesis Global Capital filed for bankruptcy. Media reports said their liabilities exceed $3 billion.