The world of cryptocurrency is no stranger to skepticism, and recently, the in-principle settlement agreement concerning the bankruptcy of the renowned cryptocurrency lender, Genesis, has been dubbed ‘wholly insufficient’ by some of its lenders. A group of lenders to the bankrupt Genesis Global Capital (GGC), also referred to as the Ad Hoc Group, were represented by attorneys Brian Rosen and Jordan Sazant when expressing their dissatisfaction.
Their displeasure comes in the wake of the DCG achieving an agreement in-principle with Genesis’ debtors and unsecured creditors (UCC), proposing USD equivalent recoveries ranging between 70%-90%. Notable is the fact that this agreement does not sit well with the Ad Hoc Group, nor with the Gemini exchange.
Could the main issue with this agreement be to do with creditor recoveries? The Ad Hoc Group seems to think so. With surprising fervor, they argue that the debtors and UCC are neglecting their fiduciary duty to maximize these recoveries. Instead, the group believes these parties are eager to simply move past this episode.
Their concern seems justified given the importance of these assets to many of the creditors. They do not view the proposed terms of the plan update as fair, stating that these conditions allow DCG to dodge any impact and actually pay less than their initial commitment.
However, it is in the issue of non-consensual third party releases where the agreement appears to reach its nadir. There is a clear opposition towards these releases, which absolve non-debtor parties from their liability with other non-debtor parties without a consensus from all potential claimholders.
Rather shockingly, it is claimed that DCG and its connected parties may be benefiting through improper agreements with the debtors and UCC.
The critical tone used by the Ad Hoc Group when stating that DCG should contribute more instead of the $275 million they propose for now, followed by another $328.8 million after two years, is indeed bold and unexpected. Such contributions they deem nowhere near enough to justify releases from potential creditor claims on the estate, and indeed any third-party creditors.
In this web of financial negotiations, one can’t help but take into serious consideration, the plight of the creditors. Their claims emphasize not only a challenging but also an uncertain future for cryptocurrency lending firms such as Genesis, which was hugely impacted by the cryptocurrency winter of 2022. Furthermore, this stance invites us to question the nature and fairness of such bankruptcy agreements in the cryptocurrency world. Are they always just, or do they perhaps favor some parties over others?