Genesis Global Capital, the now-bankrupt lending arm of Digital Currency Group (DCG), has failed to pay nearly $630 million due to creditors, leading to discussions among stakeholders about a potential default.
The situation highlights the challenges facing the cryptocurrency industry and raises questions about the financial stability of other companies, including those affected by the FTX crash.
Non-payment of DCG and its interview
Genesis Global Capital’s parent company, Digital Currency Group, has not met its obligation to pay about $630 million, which was due last week.
This development sparked discussions between Genesis, the Unsecured Creditors Committee (UCC), the Designated Creditors Group (AHG), and Gemini, regarding potential forbearance options to prevent defaults on the part of DCG.
The decision as to whether to forbear will be influenced by the parties’ assessment of DCG’s willingness to enter into good faith negotiations to reach a consensual deal.
Seeking workarounds and claims Gemini
If a consensual agreement cannot be reached, Gemini and the other parties involved a job The team is working closely with Genesis to propose a modified reorganization plan that does not rely on DCG involvement, the team says.
Genesis has already applied to the bankruptcy court to extend its exclusivity, looking for an opportunity to propose such a plan. Gemini, as an aggrieved party, is actively providing input and support for this alternative approach.
In addition, Gemini has been preparing its main Gemini claim, which is due to be filed on May 22, 2023. The claim seeks to return more than $1.1 billion worth of digital assets, which Genesis has failed to recover from approximately 232,000 users who earned active loans as on 19 January 2023.
FTX infection
The recent failure of Genesis Global Capital to meet its financial obligations is intertwined with the fallout from the collapse of Sam Bankman-Fried’s FTX cryptocurrency exchange.
Gemini, as a major client of FTX, experienced disruptions to its operations, which eventually led to its services being frozen in November.
Genesis Global Holdco, the parent company of Genesis Global Capital, has filed for Chapter 11 bankruptcy protection in the New York federal district court.
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The collapse of FTX had far-reaching consequences, leading to bankruptcy or financial distress for many players in the crypto industry.
Bitcoin (BTC)-related companies such as Celsius, Voyager Digital, BlockFi and Genesis Global Capital, along with hedge fund Three Arrows Capital (3AC), were among those affected by the crash.
This chain of events has left investors, ranging from small traders to financial institutions, at the mercy of bankruptcy proceedings and raised concerns about the stability of the crypto lending ecosystem.
As the situation develops, investors and industry participants will closely monitor the outcome, hoping to reach a fair and equitable solution to protect the interests of all parties involved.