Digital Currency Group (DCG), a prominent venture capital firm in the cryptocurrency industry, has taken a significant step toward resolving the debt issues of its crypto lending subsidiary, Genesis.
Agreement in Principle
An agreement in principle has been reached between DCG, debtors, and creditors, as outlined in a court filing on August 29. This development could potentially result in substantial recoveries for unsecured creditors, ranging from 70% to 90% in the United States dollar equivalent, provided the amended plan is approved.
Additionally, depending on the denomination of the digital asset, the amended plan might yield recoveries on an in-kind basis ranging from 65% to 90%.
Addressing Liabilities
To address its existing liabilities to debtors, including $630 million in unsecured loans due in May 2023 and $1.1 billion under an unsecured promissory note due in 2032, DCG intends to enter into new debt facilities and a partial repayment agreement. These debts comprise a $328.8 million first-lien facility maturing in two years and an $830 million second-lien facility maturing in seven years.
The agreement also includes $275 million in installment payments to be made by DCG before the plan’s effective date, pursuant to the partial repayment agreement.
Genesis’ Struggles and Bankruptcy
Genesis, like many crypto lending firms, faced significant challenges during the bear market of 2022, ultimately leading to its bankruptcy filing in January 2023. At that time, the company owed over $3.5 billion to its top 50 creditors, including entities like Gemini and VanEck’s New Finance Income Fund.
The troubles for Genesis escalated when it suspended withdrawals in mid-November 2022, citing unprecedented market turmoil linked to the collapse of the FTX crypto exchange. The company attributed the suspension to an “abnormal” surge in withdrawals that exceeded its available liquidity.
This agreement in principle signifies a significant step forward in resolving the complex debt issues within the crypto lending space and highlights the efforts to restore stability in the industry.
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