Gemini Earn, the digital asset lending arm of the Winklevoss-owned crypto exchange, has announced a mediation process with Digital Currency Group (DCG) to settle their bankruptcy dispute. The company expects an order directing the mediation to be received from Bankruptcy Judge Lane imminently.
The dispute resolution plan is scheduled to have two meetings taking place before Monday, May 8, a crucial date as DCG owes the bankruptcy estate $630 million by May 9 to 11. If DCG fails to repay its debt by then, the crypto industry giant risks defaulting on its obligations. According to Gemini, the mediation’s primary focus will be DCG’s economic contribution to the bankruptcy estate for the benefit of all creditors, including Gemini Earn users, in hopes of bringing resolution to the Genesis bankruptcy plan.
DCG is the parent company of institutional crypto-lending firm Genesis Trading, which filed for bankruptcy after suffering significant losses to Three Arrows Capital in June and FTX in November. Gemini had to halt withdrawals from its Earn product since Genesis was its trading partner for earning yield for its retail clients.
While the mediation is scheduled to last 30 days, Gemini states that both parties aim to work towards an agreement as expeditiously as possible. Gemini has also expressed its frustration over the slow progress among the parties and the need for urgency.
Last week, DCG claimed that a group of Genesis creditors had abandoned a previous restructuring deal agreed upon two months ago, which was intended to maximize value for all stakeholders. The deal would have involved DCG exchanging its $1.1 billion note to Genesis in 2022 with convertible preferred stock issued by DCG. Cameron Winklevoss criticized the issuance of the prior note as grossly misvalued and threatened legal action against Silbert.
The Winklevoss twins agreed in April to commit $100 million of their own money into Gemini, which has faced cash flow problems since its feud with Genesis began.
The outcome of this mediation holds the potential to set a precedent in the crypto industry, as it highlights the pros and cons of digital asset lending and the possible repercussions of disputes left unresolved. Market players and observers alike will be keeping a keen eye on the proceedings as they unfold.