April 19, 2024
Gemini Challenges Genesis Recovery Plan
Latest Cryptocurrency News

Gemini Challenges Genesis Recovery Plan in Cryptocurrency Legal Battle

Gemini, a cryptocurrency exchange, has expressed strong reservations about a bankruptcy recovery plan associated with Genesis, its lending program partner, which has been inactive for several months. In a recent court filing on Friday, Gemini characterized the potential deal as misleading at best.

Earlier this week, Genesis, along with its parent company, Digital Currency Group (DCG), announced a proposed remuneration plan that could potentially make over 230,000 retail creditors whole, a group that had participated in Gemini’s Earn program. The Earn program was available to customers of the Gemini cryptocurrency exchange, with Genesis providing the underlying financial infrastructure.

However, Gemini is disputing the viability of this proposal, asserting that users of Gemini Earn will not recover a value anywhere near the amount they are owed according to the plan. In their court filing, Gemini’s lawyers criticized DCG, stating that DCG touts proposed recovery rates that are a total mirage—misleading at best and deceptive at worst. They further emphasized that the proposed recovery rates do not align with reality.

Currently, DCG owes over $1.65 billion to the struggling cryptocurrency lender, Genesis, which, in turn, owes approximately $1.2 billion to Gemini. Genesis has an outstanding debt of over $3 billion to its top 50 creditors in total.

DCG’s repayment plan envisions spreading this debt over two tranches and a seven-year period, eventually aiming to make Gemini Earn users nearly whole, according to DCG’s legal representatives.

However, Gemini’s legal team contested this assertion, alleging that DCG’s proposal relies on insufficient below-market loans, which would result in par recoveries. They emphasized that receiving fractional interest and principal payments over a lengthy period from a highly risky counterparty is far from equivalent to receiving the actual cash and digital assets owed to Gemini Lenders.

Moreover, Gemini’s lawyers raised broader concerns about DCG’s tactics, accusing them of attempting to exhaust Genesis’ creditors to the point where they would accept significant losses simply to resolve the situation. Gemini and DCG have been embroiled in a long-standing dispute regarding Genesis’ debts to Gemini, culminating in a lawsuit filed by Gemini against DCG and its CEO in July following DCG’s failure to meet a deadline for negotiating a restructuring deal for its struggling lending unit.

Image by pixabay

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