Genesis Lender Group Strongly Objects to 'Entirely Inadequate' DCG Agreement

Police & Regulations
Aug 30, 2023 at 08:56 pm

Creditors who hold claims amounting to $2.4 billion against the bankrupt cryptocurrency lender are poised to disrupt an agreement that was painstakingly negotiated over several months. The bankruptcy proceedings of cryptocurrency lender Genesis have been mired in lengthy disputes revolving around loans from its parent company, Digital Currency Group (DCG). A preliminary agreement revealed earlier this week is now facing opposition from a significant cohort of creditors associated with Genesis.

The tentative agreement, forged between the now-defunct lender Genesis Global Capital (GGC) and its parent entity Digital Currency Group (DCG), is encountering resistance from a faction of creditors. In a filing submitted on Tuesday, this group expressed dissatisfaction with the handling of outstanding loans exceeding a billion dollars, deeming the approach "wholly insufficient."

GGC, which constitutes Genesis' lending arm, filed for bankruptcy in January, a consequence of the combined impacts of the collapse of the Three Arrows Capital hedge fund and the crypto exchange FTX. The liquidation process has been protracted due to protracted discussions concerning DCG's role and contribution. As outlined in the preliminary terms of the agreement disclosed by Genesis on Tuesday, DCG has agreed to a series of partial repayments to address liabilities, encompassing $630 million in unsecured loans due in May 2023 and $1.1 billion due in 2032.

However, this arrangement has not garnered unanimous approval. A group of lenders affiliated with Genesis have raised concerns, arguing that "DCG’s proposed contribution to the estate to satisfy creditor claims falls significantly short of even covering uncontested loan amounts, let alone addressing valuable estate claims that creditors have against DCG and its leadership, including Barry Silbert." This assertion was presented in a filing submitted to the Bankruptcy Court in the Southern District of New York.

The lenders also took exception to DCG and its CEO, Barry Silbert, being exempted from potential future legal claims. They expressed their intent to block any final bankruptcy agreement that includes such provisions. The filing criticized both Genesis and an official committee representing the creditors for not fulfilling their fiduciary duty to maximize recoveries by agreeing to the terms of the DCG deal. While the composition of the ad hoc lenders' group was undisclosed, the filing indicated that they collectively possess claims amounting to $2.4 billion against GGC, covering the majority of each category of claims brought against it.

In the filing released on Tuesday that unveiled the agreement, Genesis mentioned that the arrangement could potentially lead to recoveries ranging from 70% to 90% for unsecured creditors. The announcement also acknowledged that "constructive discussions" were underway with the lenders' group. As of the time of publication, neither Genesis nor DCG had issued a response to a request for comment from Bitsday.

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