A document was filed with the US District Court for the Southern District of New York today in which Genesis Global Holdco says its plan to repay crypto customers should allow them to recover 70% to 90% of their claims.
Genesis Global Holdco filed for bankruptcy earlier this year, seeking Chapter 11 status in the US bankruptcy process that allows for debt restructuring.
The company submitted its repayment plan to the court in June, while the document submitted yesterday relates to the conclusion of mediation with creditors.
On 26 September it will be the court’s turn to rule on the repayment plan, and by the looks of it, it could be approved.
The mediation
The mediation actually took place between Genesis Global’s parent company, Digital Currency Group (DCG), and Genesis’ creditors at the time of the bankruptcy.
This mediation resulted in an agreement that provides for partial repayment of the claims.
In order to finance the repayment, DCG will seek financing of just under $330 million, which will be in addition to its existing debts.
It is worth mentioning that DCG is a venture capital firm that, among others, owns CoinDesk, Grayscale Investments and Luno, as well as Genesis.
According to the agreement made with the creditors, this plan should guarantee a repayment of between 70% and 90% of the outstanding debts, i.e., with significantly limited losses for the creditors.
However, it must be stressed that the agreement is not yet final, because it still has to be approved by the court.
In total, Genesis’ debts are about $3.6 billion, and among the main creditors is crypto exchange Gemini.
Genesis crypto company
Genesis was a crypto financial services company aimed primarily at institutional investors and people with large assets.
It provided various crypto services through different subsidiaries, such as Genesis Global Trading, Genesis Global Capital, and Genesis Custody.
It was founded ten years ago, so much so that it claims to have been the first to provide an OTC trading desk on Bitcoin.
Problems began in 2022, after the implosion of the Terra/Luna ecosystem, and especially after the failure of Celsius and BlockFi.
At first the parent company DCG had taken on some debts, but after the FTX bankruptcy the situation got even worse.
Eventually the debts were too many, and the collections too few, and so there was no alternative to bankruptcy.
What’s more, in January 2023 it was accused by the SEC of selling unregistered securities through the Earn service offered by the Gemini exchange, making any rescue attempt futile at that point.
The company, however, is trying to restructure its debt, thanks largely to the agreement it just signed with creditors, and at this point Chapter 11 will not prevent it from possibly reopening once the bankruptcy proceedings are successfully completed.
Dedicated repayment to creditors
Despite all this, it is still too early for creditors to sing victory.
For one thing, it is now clear that they will never recover all their claims. However, if they really do manage to take home 90%, they might even call themselves moderately satisfied with how the post-bankruptcy negotiations were conducted.
However, there are still some hurdles to overcome.
The first is the hearing at the end of September, although it seems unlikely that the court will object to a plan that was apparently decided together with the creditors themselves, or at least the main creditors.
The second is the possible appeals of the smaller creditors, those who did not participate in the mediation. However, this obstacle seems to be able at most to lengthen the time, but not jeopardize the agreement in principle.
The third, which is the main one, is the timing.
While obtaining the approval of the court, and of all creditors, will not be forthcoming, there will also be a need to wait for DCG to be able to disburse repayments. Thus it seems rather unlikely that creditors will be able to start receiving repayments by the end of the year.
Moreover, if the crypto winter does not end, it is also not inconceivable that DCG could have other problems that could further lengthen the timeline, unless a new bull run begins.
It is worth noting that this bankruptcy proceeding to date appears to be one of the fastest-moving in crypto, given that for other similar proceedings, creditors are still awaiting repayments almost ten years after the bankruptcy.