Genesis, parent DCG reach initial deal with creditors

Crypto lender Genesis froze withdrawals from the program in November 2022, sparking a conflict between Genesis’ parent company Digital Currency Group and Gemini co-founders

Bankrupt crypto lender Genesis has reached an agreement in principle on a restructuring plan backed by its parent company, Digital Currency Group (DCG), and its primary creditors, which include Gemini, an attorney for the firm said on Monday.

Attorney of Genesis, Sean O’Neal told a U.S. bankruptcy judge in a Monday court hearing that the firm is finalizing a restructuring agreement that would either result in a sale of Genesis or turn over its equity to creditors.

The agreement was supported by Gemini, which worked with Genesis on a program called Gemini Earn that drew $900mln in deposits from 340k users. Genesis froze withdrawals from the program in November last year, creating a dispute between Genesis’ parent company DCG and Gemini co-founders Cameron and Tyler Winklevoss.

Under the new restructuring agreement, Gemini will contribute up to $100mln to reimburse Earn users with frozen assets.

Gemini’s attorney Anson Frelinghuysen told the court that the agreement will ensure a ‘substantial recovery’ for Gemini Earn users.

Gemini sees this as a crucial move toward undoing the harm that Gemini users have suffered during the past few months, Frelinghuysen said.

Genesis filed for bankruptcy on January 20, owing around $3.4 billion to creditors.

A number of crypto firms have been under pressure while navigating unprecedented industry-wide crisis as investor appetite for digital assets has faded following the collapse of FTX.

Last month, Genesis – which brokers digital assets for financial institutions such as hedge funds and asset managers – slash 30 per cent of its workforce in a second round of dismissals in less than six months, as per a person familiar with the matter.

Apart from Genesis, DCG owner Barry Silbert owns a portfolio of crypto companies, including crypto news and events website CoinDesk and New York-based Grayscale, a major digital asset manager. Those companies are not bankrupt.

The week before Genesis filed for bankruptcy, the U.S. SEC charged Genesis and Gemini with selling unregistered securities illegally via their Gemini Earn lending product.