Gemini and DCG agree on Genesis debt repayment plan
Barry Silbert's company will restructure debt and the Winklevoss brothers' crypto-exchange will add $100 million to repay Gemini Earn customers
U.S. crypto exchange Gemini, cryptocurrency lender Genesis Capital and its parent company Digital Currency Group (DCG) have agreed on a repayment plan for the bankrupt Genesis to Gemini Earn program customers who lost access to their funds last November, the exchange said on its website.
The Gemini Earn program offered investors the opportunity to earn up to 8 percent annually on their digital assets as part of an agreement under which the company lent them to Genesis. Shortly after FTX went bankrupt, Genesis halted its withdrawals, leaving some 340,000 Earn customers without access to their cryptocurrencies.
According to Gemini, Genesis owed $900 million to a group of those customers on the Gemini platform. In January, exchange co-founder Cameron Winklevoss accused DCG head Barry Silbert of trying to delay paying back those funds and demanded his resignation.
Genesis owes about $3.5 billion to its 50 largest creditors, according to court documents. The cryptocurrency lender's bankruptcy filing lists $766 million in claims related to Gemini Earn customers as the largest claim.
On Feb. 6, DCG and creditors representing $2 billion in claims against Genesis, including Gemini, reached an agreement at a court hearing on a plan that involves DCG restructuring about $1.7 billion of its obligations to Genesis.
Also, according to the Financial Times, DCG is selling shares of Grayscale's cryptocurrency trusts at a deep discount to raise money to pay off Genesis' debts. Since Jan. 24, the company has raised $22 million by selling about 25 percent of Grayscale's Ethereum Trust for half the price.
As part of the plan to repay debts owed to its customers, Gemini Exchange will allocate up to $100 million and also distribute the pledge it previously received from Genesis to Earn customers.
Late last December, investors sued Gemini and its founders, brothers Tyler and Cameron Winklevoss, for violating securities laws. The class action lawsuit says if Gemini's Earn product had been registered, the plaintiffs would have received information that would have allowed them to better assess risks. Last month, the U.S. Securities and Exchange Commission (SEC) also sued Genesis and Gemini, accusing them of offering and selling unregistered securities under the Gemini Earn program.
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