Digital Currency Group (DCG), a significant venture capital firm in the cryptocurrency industry, has reached a preliminary agreement with the creditors of its crypto lending subsidiary, Genesis.
Subject to approval, the revised plan is expected to result in unsecured creditors recovering between 70% to 90% of their funds in terms of dollar equivalents. Depending on the specific digital asset denomination, physical recovery rates are projected to range from 65% to 9 0 %, as outlined in a document released on August 29.
DCG expressed satisfaction with the progress, stating that the agreement in principle with Genesis and the Committee of Unsecured Creditors will serve as a framework for a comprehensive resolution in the Chapter 11 bankruptcy case. This settlement will offer creditors the opportunity for substantial recovery, DCG noted . The company emphasized that the agreement will be formalized and submitted to the bankruptcy court for final approval in connection with the confirmation of the Chapter 11 plan.
To address its outstanding debts, which include a $630 million unsecured loan due in May 2023 and a $1.1 billion unsecured promissory note due in 2032, DCG will initiate new debt financing and a partial repayment protocol. The new debt financing will comprise a two-year first lien of $328.8 million and a seven-year second lien of $830 million. Additionally, DCG is set to make $275 million in installments before the effective date of the program under the partial repayment agreement.
Genesis, like many crypto lending companies, faced challenges due to the extensive bear market of 2022. The company filed for bankruptcy in January 2023, revealing over $3.5 billion in debts owed to its top 50 creditors, including entities like Gemini and VanEck's New Finance Income Fund.
Genesis had halted withdrawals in November 2022, citing the extreme market volatility triggered by the collapse of the FTX cryptocurrency exchange. The company attributed the incident to an influx of "unusual" withdrawal amounts that exceeded its liquidity capacity.
