Winklevoss Twins’ Crypto Exchange Gemini to contribute $100 million to Genesis for bankruptcy recovery

varsha sarkar

May 3, 2023

2:11 pm

Winklevoss Twins' Crypto Exchange

According to Genesis’ lawyers, who announced the news during a court hearing on Monday, as part of an agreement with bankrupt Genesis Global Capital and parent Digital Currency Group, cryptocurrency exchange Gemini has committed to providing its users with a total of $100 million in cash.

The recovery plan and restructuring agreement were revealed at a status conference for the crypto lender Genesis, which declared bankruptcy in New York on January 19.

Cameron and Tyler Winklevoss, who formed Gemini, were involved in a public back-and-forth with Barry Silbert, the owner of DCG. The Winklevoss brothers have openly attributed problems with Earn, one of Genesis’s own products, on Silbert’s poor management of the company. Earn advertised returns of up to 8% on user deposits.

“This strategy is a crucial step forward towards a considerable recovery of assets for all Genesis creditors,” Gemini wrote its users in letters accessed by CNBC. This proves Gemini’s “ongoing dedication to assisting Earn users in making a full recovery.”

The restructuring plan’s broad details were revealed in Manhattan bankruptcy court. The agreement reached by Genesis, DCG, Gemini, and a number of Genesis’ creditors is based largely on a refinancing of Genesis’ loans to DCG. Genesis provided DCG with a loan of about $500 million in cash and bitcoin, some of which went towards founder Silbert’s venture capital investments.

Additionally, DCG would provide Genesis “all stock” in Genesis’ trading company, which was still in business during the bankruptcy. A Genesis lawyer said that DCG will also issue a two-tranche debt facility with a maturation date of June 2024. One tranche will bear interest at a rate of 11%, while the other will bear interest at a rate of 5%. DCG will also give Genesis creditors convertible preferred stock.

In addition, DCG offered Genesis a $1.1 billion promissory note following the failure of cryptocurrency hedge firm Three Arrows Capital. The Winklevoss brothers criticized that strategy as “a complete gimmick that accomplished nothing to help Genesis’ immediate liquidity position or make its balance sheet solvent”.

That promissory note will be equitized, or changed into something with real worth, usually equity, as part of the recovery plan, according to CoinDesk.

Gemini thanked its users for their trust during this trying time in a statement to users.

Customers of Gemini lent money to Genesis for months so that it might be distributed around numerous crypto trading desks. Following the failure of FTX in November, Genesis suspended its lending activities, forcing Gemini Earn to temporarily cease operations as well.

Earn has suspended all withdrawals for almost three months.The 340,000 retail customers of Gemini are upset because of a certain situation, and some of them have come together to file class actions against Genesis and Gemini.

On January 12, the Securities and Exchange Commission filed a complaint alleging that Gemini and Genesis sold unregistered securities in conjunction with a high-yield programme made available to depositors.

Conclusion

The contribution of up to $100 million by Gemini to Genesis Global Capital as part of a restructuring deal and recovery plan is a critical step forward towards the substantial recovery of assets for all Genesis creditors. The move demonstrates Gemini’s continued commitment to helping its users achieve a full recovery and its dedication to resolving the issues caused by the bankruptcy of Genesis.

The restructuring deal cut between Genesis, DCG, Gemini, and Genesis’ creditors is a significant effort to refinance Genesis’ loans to DCG and provide equity to Genesis’ trading subsidiary. The recovery plan will be a relief to Gemini’s customers, who have been waiting for nearly three months to withdraw their funds from the Gemini Earn product. The move is expected to resolve the issues between Gemini, Genesis, and their customers and restore trust in the crypto lending industry.

Overall, the contribution by Gemini to Genesis’ bankruptcy recovery is a positive development in the crypto industry, indicating a willingness to work towards resolving issues and ensuring that users’ funds are protected. It also highlights the importance of regulatory compliance, which was the cause of the SEC filing charges against both Gemini and Genesis for selling unregistered securities. As the crypto industry continues to grow and mature, regulatory compliance and user protection will remain essential factors in its success.

varsha sarkar

May 3, 2023

2:11 pm

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