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Revitalizing Gemini Earn: DCG and Genesis Unveil Ambitious Remuneration Plan for Struggling Customers

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Sep 14, 2023 at 11:28 am

In a filing made on Wednesday, it was outlined that in the event of approval from the various creditor groups, "Gemini Earn users could potentially recover around 95-110% of their claims."

Genesis, a cryptocurrency lending operation, along with its parent company Digital Currency Group (DCG), have indicated that over 230,000 retail creditors who participated in Gemini's Earn program may see a substantial portion of their claims fulfilled through a proposed remuneration deal slated for a vote later this year.

While Earn was a service extended to clients of the Gemini crypto exchange, the financial infrastructure behind the program was provided by Genesis. This became problematic for Gemini users when Genesis was compelled to cease withdrawals and subsequently filed for bankruptcy protection.

According to the filing submitted on Wednesday, in the event that assorted Genesis creditor groups endorse the proposed deal, "Gemini Earn users are estimated to recover approximately 95-110% of their claims." Attorneys representing Genesis and DCG had previously suggested that unsecured creditors could potentially receive up to 90% of the U.S. dollar equivalent of their holdings through the company's restructuring.

Genesis' lending division initiated bankruptcy proceedings in January, a consequence of a dual setback resulting from the collapse of hedge fund Three Arrows Capital and the crypto exchange FTX. Discussions regarding the extent of DCG's contribution have extended the resolution process for several months.

Meanwhile, a very public and contentious dispute has unfolded between the proprietors of the Gemini exchange, Cameron and Tyler Winklevoss, and DCG founder Barry Silbert. Tuesday's filing criticized Gemini, alleging that the company was not taking financial responsibility for compensating its own customers in the bankruptcy proceedings.

The claim for Earn customers is being calculated based on the combined returns from the Genesis bankruptcy estate and more than 30 million shares of the Grayscale Bitcoin Trust (GBTC) held by Gemini users, valued at around $607 million, as reported by DCG's banking representatives. (Grayscale is another division of DCG.)

"A DCG executive, who preferred not to be identified, stated in an interview, 'Depending on how the bankruptcy claim is calculated, the Earn customers are estimated to get between $440 million and $765 million of a claim. That claim is estimated to receive distributions of $400 million to $535 million. And then on top of that Earn customers get the $600+ million dollars of collateral that Gemini is holding. So, they're looking at total recoveries of a billion dollars or more, which is roughly their total claim. Essentially, it’s a full recovery for current customers under these scenarios.'"

As outlined in the proposed agreement in principle shared on August 29, some of these repayments may be made in-kind, signifying that certain crypto holders may receive cryptocurrency, rather than a payment in actual U.S. dollars.

DCG aims to submit a revised version of the proposed plan by October 6 and to seek votes by December 5. The goal is to secure approval for the plan by year-end, with distributions envisioned to be disbursed as promptly as possible thereafter, according to the filing.

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