Digital Currency Group (DCG), the parent company of cryptocurrency lender Genesis, did not fully fulfill its $630 million debt obligation to Gemini last week. This inability to settle the loan has sparked concerns, as there were previous expectations of DCG potentially defaulting on the loan, which is now under the oversight of Genesis’ bankruptcy estate.
Gemini is now contemplating granting forbearance to the Digital Currency Group (DCG) following its failure to repay $630 million last week. Forbearance, in this context, refers to a temporary arrangement where the borrower can either reduce their mortgage payment or temporarily halt making payments altogether.
However, it’s important to note that the borrower is still responsible for paying the reduced or paused amounts later. As part of a mediation process, Gemini initially granted 30 days to the Digital Currency Group (DCG) to secure the necessary funds.
In January, Gemini decided to close down Earn after alleging that Genesis had not returned over $900 million worth of assets owed to the exchange. In its latest statement, Gemini claimed that the decision to grant forbearance would depend, in part, on DCG’s willingness to engage in genuine negotiations for a mutually acceptable agreement.
Suppose the parties involved fail to reach a consensus. In that case, Gemini intends to collaborate with Genesis Capital, owned by DCG, to propose terms for a revised reorganization plan that could proceed without DCG’s consent.
Consideration will be based in part on whether the parties believe DCG will engage in good faith negotiations on a consensual deal.
Genesis’ Debt To Top 50 Creditors Exceeds $3.5 Billion
As per the court filing, Genesis has outstanding debts exceeding $3.5 billion to its prominent 50 creditors, such as Gemini, Cumberland, Mirana, MoonAlpha Finance, and VanEck’s New Finance Income Fund. Since its inception, the Genesis settlement process has been entangled in a web of controversy.
Following an “agreement in principle” between Genesis and DCG, a full settlement was submitted to the bankruptcy court in February. The initial settlement agreement aimed to provide creditors with 80% of the funds they had lost due to the bankruptcy.
Unfortunately, the Genesis creditors subsequently escalated their demands a few months later, causing the initial settlement plans to unravel. By May 22, Gemini intends to file a fresh claim, known as the “Gemini Master Claim,” to recover more than $1.1 billion of digital assets.
Genesis did not return these assets to approximately 232,000 Gemini Earn users who held active loans as of January 19, 2023. This plan would be self-contained, separate from any necessity for DCG’s consent or participation. It emphasizes the independence of the proposal, indicating that it does not rely on or require DCG’s approval or active engagement.