In a significant development within the cryptocurrency industry, Digital Currency Group (DCG), a prominent venture capital firm deeply entrenched in the crypto landscape, has made significant strides toward resolving the financial troubles of its crypto lending subsidiary, Genesis. This initiative is marked by an in-principle agreement that has been reached with Genesis’ creditors, as detailed in a court filing published on August 29.
The core essence of this agreement lies in the potential recoveries for unsecured creditors, estimated to range between 70% to 90%, contingent on the approval of the amended plan. This represents a pivotal step towards alleviating the financial woes of Genesis, which had previously encountered substantial adversity due to the tumultuous bear market of 2022, eventually leading to its bankruptcy filing in January 2023. The company found itself grappling with a debt burden surpassing $3.5 billion, owed to its top 50 creditors, including reputable entities such as Gemini and VanEck’s New Finance Income Fund.
The revised plan introduces a novel approach to debt repayment, allowing for recoveries spanning from 65% to 90% on an in-kind basis, dependent on the specific digital asset denomination. This innovative strategy underscores DCG’s commitment to mitigating the impact of the bear market on the crypto lending ecosystem.
DCG plans to save Genesis
The plan further details how DCG intends to fulfill its existing liabilities towards debtors, including substantial obligations such as $630 million in unsecured loans due by May 2023 and a considerable $1.1 billion under an unsecured promissory note scheduled for repayment in 2032. To meet these financial obligations, DCG envisions engaging in new debt facilities while also entering into a partial repayment agreement. These arrangements encompass a $328.8 million first-lien facility characterized by a two-year maturity period and an $830 million second-lien facility that spans a more extended seven-year maturity window. In addition, a sum of $275 million is designated for installment payments preceding the effective date of the plan, as outlined within the partial repayment agreement.
The Genesis case serves as a stark reminder of the far-reaching ramifications of market volatility within the crypto sphere. The company’s decision to halt withdrawals in November 2022 due to unprecedented market turmoil, attributed to the collapse of the FTX crypto exchange, culminated in a withdrawal surge that surpassed the company’s liquidity capacity, leading to operational challenges.
