One of the most troublesome events in the cryptocurrency markets in 2023 was the bankruptcy of Genesis, which dealt a serious blow to the Digital Currency Group (DCG), the company that manages a group of billion-dollar cryptocurrency companies. This bankruptcy could have caused significant financial burden and even led to a major collapse, potentially resulting in the loss of many subsidiary companies, including Grayscale. Investors were deeply concerned about this situation.
Digital Currency Group has proposed a new payment plan for the customers of Gemini exchange as part of the bankruptcy proceedings of Genesis. Genesis, which was the largest cryptocurrency loan provider during the crypto crash last year, suffered a significant blow, and its parent company DCG also faced cash flow problems. According to the latest draft shared by DCG, creditors can receive balance payments ranging from 70% to 90%. The total debt owed to creditors by the company amounts to approximately $3.5 billion.
The new agreement, which is awaiting the approval of creditors, will renegotiate the terms of the $630 million loan between Genesis and DCG. Under this agreement, a portion of the loan will be repaid in cash shortly after the completion of the agreement, while the remaining amount will be structured as a two-year promissory note. Genesis had recently filed a lawsuit to collect this debt.
Gemini Earn, a product of Genesis, has a total debt of approximately $1.1 billion owed to its customers, which accounts for about 99% of all creditors. These creditors are in a slightly better position in the general pool of creditors due to the collateral sent by Genesis to Gemini as part of their business relationship. DCG representatives emphasize that Genesis sent approximately 31 million GBTC shares as collateral, which has significantly appreciated in value. On the other hand, in the scenario of a possible ETF approval, this collateral could more than cover the debt. The negative premium will be eliminated with a 30% discount.
Considering the potential rise of BTC with ETF approval, it is clear why Grayscale and its parent company DCG are fighting so hard. The company, which has already achieved victory against the SEC, now needs positive news from the SEC in order to recover more quickly. Yesterday, Gensler stated that they continue to review the latest court decision and the application, without signaling any objections to the decision. Furthermore, the deadline for filing objections will expire at the beginning of next month.