The new plan will see 80% of funds returned to creditors
- Genesis has filed for bankruptcy in the US, owing creditors $3.4 billion.
- A new restructuring plan is in place that will see creditors receive back at least 80% of their funds.
- The restructuring will involve the sale of Genesis Global Trading, a contribution of $100 million from Gemini and the exchange of a $1.1 billion promissory note for convertible preferred stock.
Started with FTX
The collapse of Sam Bankman-Fried’s empire, FTX, spread contagion across the crypto industry like wildfire. As we previously reported, Genesis filed for bankruptcy in the US with at least $3.4 billion owed to creditors. In a valiant effort to restructure and recover funds for investors, Genesis has been seeking at least $1 billion in fresh capital for the past two months. Unfortunately, this funding has failed to materialize and rumors of a potential investment from Binance have come to nothing.
Good things in the pipeline
But, it seems there is now good news for Genesis creditors as a new restructuring plan has been proposed, and it looks like creditors can expect to receive back at least 80% of their funds. Under this agreement in principle with Digital Currency Group (DCG) and its creditors, DCG will contribute its share of equity in Genesis Global Trading to Genesis Global Holdco. This will bring all Genesis-related entities under the same holding company and result in the eventual sale of Genesis Global Trading as part of the restructuring efforts.
Additionally, crypto exchange Gemini will contribute $100 million for its Gemini Earn users who have frozen funds with the bankrupt firm. DCG will exchange an existing $1.1 billion promissory note for convertible preferred stock and refinance its existing 2023 term loans with an aggregate value of $526 million, which will then be payable to creditors.
The Recovery Rate
According to a user update from Genesis creditor and crypto yield platform Donut, the recovery rate for creditors is expected to be approximately $0.80 per dollar deposited, with a path to $1.00. Of course, the recoverable amount depends on the equity note, realized liquidation prices, and the unknown costs associated with the remainder of the bankruptcy.
Genesis is currently in the midst of Chapter 11 bankruptcy proceedings, which stem from a liquidity crisis in November brought on by the bankruptcy of crypto exchange FTX. Unfortunately, Genesis’ struggles demonstrate that the contagion from FTX is not yet over and may further slow down the adoption and trust from institutions. But with this new restructuring plan in place, there is hope that Genesis will emerge well-positioned for the future.