Lenders involved with the bankrupt cryptocurrency lender, Genesis, are expressing dissatisfaction with the recent settlement in principle agreement. This agreement was reached with various parties, including Digital Currency Group (DCG).
Represented by attorneys Brian Rosen and Jordan Sazant, an ad hoc group of lenders from Genesis Global Capital (GGC) responded to the public bankruptcy plan's update on August 29. They declared the principles of the agreement reached as "completely inadequate."
The update revealed that DCG had reached an agreement in principle with Genesis' unsecured creditors (UCCs) and debtors, proposing a recovery range of 70% to 90% in US dollar equivalents. However, both the task force and the Gemini Exchange did not endorse the principled trading outlined in the update.
While mediation efforts have ceased, discussions with the ad hoc group and Gemini regarding the agreement in principle are ongoing, according to the update. In response, the task force made it clear that it did not support the proposed deal, arguing that DCG's contribution w as insufficient to meet the loan amount. The lenders accused the debtors and UCCs of failing in their fiduciary duties to maximize creditor recovery, alleging that they were primarily concerned with protecting their own interests.
The Genesis lenders further contended that DCG should not be entitled to non-consensual third-party releases. These releases absolve non-debtor parties from liability to other non-debtor parties without the consent of all potential claimants. The task force claimed that the debtors and UCC had agreed to an inappropriate release of third-party claims against DCG and its affiliates.
In their view, DCG's proposed contributions were far from sufficient, stating that DCG would only pay $275 million immediately and an additional $328.8 million over the next two years, instead of the $630 million that was initially owed three months ago. The lenders found it implausible that these contributions could be regarded as substantial enough to exempt the estate from claims, particularly those by third-party creditors.
Genesis, like other cryptocurrency lending firms, suffered due to the 2022 crypto winter. The company filed for bankruptcy in January 2023 after suspending withdrawals during a significant liquidity crisis in mid-November 2022. It is reported that Genesis owes over $3.5 billion to its top 50 creditors, including companies such as Gemini.
