The current ripple in the crypto-world seems to be emanating from the discord between Gemini and Digital Currency Group (DCG) over alleged misleading bankruptcy recovery plans concerning Genesis, the crypto lending entity. Genesis functioned in partnership with Gemini on a lending program that has remained non-responsive for an extended period, raising eyebrows and garnering attention.
Earlier this week, an ambitious plan was put forward by Genesis and DCG, promising to compensate over 230,000 retail creditors of Gemini’s Earn program. Genesis supplied the fiscal infrastructure that powered the Earn program, attracting myriad Gemini crypto exchange customers. The proposed remuneration plan, if agreed upon, will see these creditors’ initial investments restored to a level almost equal to their actual value, making them “nearly whole.”
However, escalating tensions between Gemini and DCG burst onto the scene with Gemini challenging the validity of the proposed recovery. Gemini’s Earn users, they argue, will fall far short of recouping the real value of their investments under the suggested agreement. They counter DCG’s optimistic recovery rates, terming them as a ‘total mirage’ and possibly deceptive.
The crux of the matter is a $1.65 billion debt owed by DCG to Genesis, which, in turn, owes around $1.2 billion to Gemini. Genesis’ cumulative debt to its top 50 creditors hovers around $3 billion. In DCG’s repayment plan, Gemini’s claims are to be settled using two tranches over seven years.
Yet, an important concern emerged. Gemini’s legal team claims that DCG’s proposal parallels a scheme to pay ‘par’ recoveries through ‘inadequate’ below-market loans. The settlement offered to creditors, a fractional share of interest and principal payments over seven years, is uncomfortably risky. The lawyers criticised DCG’s plan as an attempt to dispatch its debts via ‘I.O.U.s’ instead of hard cash and digital assets.
Furthermore, DCG is allegedly using tiresome defensive strategies to coerce Genesis’ creditors to accept drastically reduced payouts and resolve the situation. With creditors gradually pushed to the brink, tensions between Gemini and DCG have culminated in a legal battle. The lawsuit was filed in July by Gemini against DCG and its CEO, a day following DCG’s failure to conclude a restructuring agreement for Genesis. It seems that what the future holds for both parties and the creditors is still up in the air.
Source: Coindesk
