Genesis Creditors Could See 70% – 90% Fund Recovery

Digital Currency Group (DCG), the parent company of the insolvent crypto lending platform Genesis, has entered into an in-principle agreement with Genesis creditors to resolve the claims.

Up to 90% of funds may be recovered as part of the amended filing.

Upon the amendment, unsecured creditors of the crypto lender could reclaim 70% – 90% of their funds in United States dollars (USD). Alternatively, they could recover between 65% and 90% of their claims in digital assets, depending on the denomination of the digital asset.

DCG also devised a new plan to repay “$630 million in unsecured loans due in May 2023, and $1.1 billion under an unsecured promissory note due in 2032.” The plan includes DCG entering into two new debt facilities: “a $328.8 million first-lien facility with a 2-year maturity and an $830 million second-lien facility with a 7-year maturity.”

DCG will also make installment payments of $275 million before the plan becomes effective. In exchange, DCG and its related parties will receive certain releases from Genesis and its creditors, the amended plan reveals.

The Ghosts of 2022

Genesis is among the companies under damage following the FTX crash. In January, Genesis Global Holdco (GGH) declared the insolvency of Genesis Global Capital (GGC) and Genesis Asia Pacific (GAP). The two entities filed for bankruptcy protection under Chapter 11.

Genesis’ crisis was allegedly rooted in the collapse of Three Arrows Capital (3AC) in August 2022. At that time, the loss was estimated at roughly $2.3 billion. Workforce cutoffs and the FTX saga shortly after that ended the crypto lender’s operation.

At the time of the filing, GGH’s estimated assets and liabilities ranged from $1 billion to $10 billion. Its largest creditors were Gemini ($765 million), Mirama investment fund ($151 million), Decentraland ($55 million), investment fund VanEck ($53 million), Cumberland ($18 million), and XLM Stellar Foundation ($13 million).

Two other major creditors, with estimated claims of $462.2 million and $230 million, were not named. There is big money on the line, and everyone wants liquidity.

In July, FTX and Genesis reportedly reached an agreement to resolve a dispute. Previously, FTX claimed that Genesis owned it for over $2 billion.

Evergrande Bankruptcy Worsens Macro Outlook

China’s property giant Evergrande filed for Chapter 15 Bankruptcy Protection in New York earlier this month. The company has been in crisis since 2021. Despite the government bailout, Evergrande couldn’t resolve its financial crisis.

Chapter 15 of the United States Bankruptcy Code provides a framework for the orderly and fair administration of cross-border insolvencies.

The U.S. bankruptcy court will cooperate with the courts of the relevant country to complete the bankruptcy process. This cooperation may include sharing information, issuing orders that are binding in both countries and appointing a joint representative to oversee the case.

There is no way to know how China will handle one of its biggest bankruptcies, but the markets know that the CCP isn’t going to help anyone overseas. We are looking at a brave new world.

The Evergrande saga sparked new concerns over the macro outlook and its potential impact on the crypto market. Meanwhile, global authorities have been ramping up their scrutiny over the crypto sector.

Regulatory bodies have expressed growing interest in understanding and addressing the potential risks of digital assets and decentralized finance (DeFi). These efforts aim to safeguard investor protection, ensure financial stability, combat money laundering, and mitigate other illicit activities within the crypto market.

Last week, the U.S. Treasury Department introduced new rules for reporting cryptocurrency taxes. Crypto brokers must register and share information on users’ transactions with the IRS within two years. This rule applies to exchange platforms and payment processors.

The proposal, however, has faced significant backlash from the industry. Many industry experts have voiced their disagreement, including Miller Whitehouse-Levine, the CEO of the DeFi Education Fund.