Gemini contributes $100 million to Genesis bankruptcy plan

Crypto exchange Gemini will contribute up to $100 million in cash for its customers under an agreement with bankrupt Genesis Global Capital and parent company Digital Currency Group, Genesis lawyers said in a court hearing on Monday.

The restructuring deal and recovery plan were announced during a status conference for crypto lender Genesis, which filed for bankruptcy protection in New York on Jan. 19. Genesis owed billions of dollars to its creditors, including Gemini and its users.

Founded by Cameron and Tyler Winklevoss, Gemini has been involved in a high-profile back-and-forth with DCG owner Barry Silbert. The Winklevoss twins have publicly blamed Silbert’s mismanagement of Genesis for problems with one of his own products called Earn, which fostered returns of up to 8% on customer deposits.

“This plan is a critical step forward toward substantial asset recovery for all Genesis creditors,” Gemini told its users in correspondence viewed by CNBC. It demonstrates “Gemini’s ongoing commitment to helping Earn users achieve a full recovery”.

Further details of the restructuring plan were announced in Manhattan Bankruptcy Court. The deal, made between Genesis, DCG, Gemini and Genesis’ creditors, is largely based on a refinancing of Genesis’ loans to DCG. Genesis has loaned DCG over $500 million worth of cash and bitcoin, in part to fund founder Silbert’s venture investments.

DCG will also provide Genesis with “all of the equity” in Genesis’ trading subsidiary, which remained operational during the bankruptcy. Additionally, DCG will provide a two-tranche credit facility maturing in June 2024, with 11% interest on one tranche and a 5%-interest bitcoin tranche, “equivalent to approximately $500 million,” a Gensis attorney said .

DCG will also issue convertible preferred stock to Genesis creditors.

DCG has also issued Genesis a $1.1 billion promissory note after crypto hedge fund Three Arrows Capital collapsed. The Winklevoss brothers called the maneuver “a complete gimmick that did nothing to improve Genesis’ immediate cash position or make its balance sheet solvent.”

As part of the recovery plan, this promissory note will be equity backed, meaning it will be converted into something of substantial value, typically equity, CoinDesk reported.

“Thank you for putting your trust in us during this challenging time,” Gemini said in his message to users.

For months, Gemini customers borrowed money Genesis for placement across various crypto trading desks. When Genesis halted its lending business following FTX’s collapse in November, Gemini Earn was forced to temporarily suspend operations as well.

All withdrawals at Earn have been paused for nearly three months. Gemini’s 340,000 retail customers are angry, and some have banded together class lawsuits against Genesis and Gemini.

The Securities and Exchange Commission Complaint filed January 12 charges against Gemini and Genesis for allegedly selling unregistered securities in connection with a high-yield product being offered to depositors.

REGARD: Crypto broker Genesis files for Chapter 11 bankruptcy