GIC-backed DCG, lender Genesis reach bankruptcy recovery deal with crypto exchange Gemini

Genesis Global Capital stopped withdrawals in November due to a liquidity crunch. PHOTO: REUTERS

SINGAPORE - The parent company of bankrupt cryptocurrency lender Genesis, which is backed by Singapore sovereign wealth fund GIC, has agreed on a tentative plan with creditors, including crypto exchange Gemini, as it seeks a way out of a legal quagmire.

Gemini’s co-founder Cameron Winklevoss said in a tweet on Tuesday morning that venture capital firm Digital Currency Group (DCG), Genesis Global Capital, the exchange and other creditors have reached an in-principle settlement agreement.

The agreement was heard in a United States bankruptcy court.

“This plan is a critical step forward towards a substantial recovery of assets for all Genesis creditors,” he said, adding that it provides a path for the 340,000 affected Gemini users to recover their assets, without specifying the amount.

Genesis, which filed for Chapter 11 bankruptcy protection in the US on Jan 19, reportedly owes creditors over US$3 billion (S$4 billion). It owes more than US$700 million to its largest creditor, Gemini, founded by the Winklevoss twin brothers.

The latest deal is considered progress from the stalemate that lasted for weeks, and comes after the Winklevoss brothers’ public Twitter row in January with DCG chief executive Barry Silbert over the brothers’ retail clients’ US$900 million deposits that were stuck with DCG’s Genesis.

Genesis Global Capital stopped withdrawals in November due to a liquidity crunch.

Its troubles led to a suspension of withdrawals at Gemini’s Earn programme, which is a scheme where investors may choose to lend crypto to certain institutional borrowers to earn interest.

Genesis attributed its troubles to the collapse of now-bankrupt hedge fund Three Arrows Capital (3AC) and exchange FTX, whose founder and former chief executive Sam Bankman-Fried now faces multiple criminal charges in the US and is out on a US$250 million bail.

Part of the recovery plan involves Gemini contributing up to US$100 million more to pay Earn users, Mr Winklevoss said on Tuesday.

The plan needs to be approved by the court after due diligence is carried out on Genesis’ financials, he noted.

Media reports said that the settlement will also restructure the debt DCG owes Genesis, including the US$575 million in loans due in May and the US$1.1 billion promissory note due in 2032.

Mr Silbert, in a letter leaked online in November, said that the group owes its lending arm Genesis Global Capital US$575 million.

There was also a US$1.1 billion promissory note due in June 2032 that was issued when DCG took over Genesis’ liabilities in relation to 3AC.

DCG, which owns prominent asset manager Grayscale Investments, has stakes in more than 160 firms, including Nasdaq-listed exchange Coinbase Global, payments network Ripple and wallets Circle and Ledger.

Valued at US$10 billion in 2021, DCG raised US$700 million in November 2021 from prominent investors such as Softbank, Alphabet’s CapitalG, Ribbit Capital and GIC.

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