Gemini Dismisses New DCG/Genesis Repayment Plan

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  • Gemini has criticized DCG’s recent bankruptcy recovery plan for Genesis as “misleading at best”
  • DCG and Gemini have been in dispute over the proposal to make creditors “nearly whole”
  • Genesis’ lawyers argued that repayment will effectively be in IOUs

Crypto exchange Gemini has criticized a bankruptcy recovery plan put forward by Digital Currency Group (DCG) on behalf of its child company, Genesis, saying its estimation for customer recoveries is ‘misleading at best.’ Last week, Genesis and DCG stated that over 230,000 retail creditors who used Gemini’s Earn program could be made “nearly whole” under a proposed remuneration deal to be voted on later this year. However, Gemini disputes this claim, claiming that Gemini Earn users will not recover anywhere near the real value of the money they are owed under the proposal.

DCG Says It Can Make Gemini Creditors “Nearly Whole”

Genesis fell into bankruptcy in January owing more than $3 billion to its top 50 creditors overall, with more than a billion dollars of Gemini customer funds stuck on it. As a result of the financial mess, DCG owes over $1.65 billion to Genesis, which, in turn, owes around $1.2 billion to Gemini, with arguments leading to legal action as the year has progressed.

DCG put forward a new recovery plan in a bankruptcy court filing last week in which it was claimed that Gemini Earn creditors might get a full recovery of their funds. DCG’s proposed repayment plan would be spread over two tranches and seven years, ultimately making Gemini Earn users “nearly whole,” according to DCG’s lawyers, in a move intended to end the bitter dispute between the parties.

Gemini Lawyers Savage DCG Plan

The plan hasn’t gone down well with Gemini’s legal team, however, who last week contested DCG’s rainbow picture, alleging that the proposal would allow the firm to make “par” recoveries through inadequate below-market loans. This is because receiving fractional interest and principal payments over seven years from a risky counterparty is not equivalent to receiving the actual cash and digital assets owed by Genesis to the Gemini Lenders:

DCG touts proposed recovery rates that are a total mirage – misleading at best and deceptive at worst. Make no mistake: Gemini Lenders will not actually receive anything close in real value terms to the proposed recovery rates under the current ‘agreement in principle.’

Gemini’s lawyers further contend that DCG’s proposal resembles an attempt to meet its obligations through the issuance of “I.O.U.s” rather than paying with real cash and digital assets and expressed broader concerns about DCG’s efforts to pressure Genesis’ creditors into accepting significant concessions.

I seems, then, that this issue is set to extend into 2024 and possibly beyond.