Cointime staff: Genesis Capital's parent company Digital Currency Group (DCG) denied involvement in Genesis' bankruptcy filing in a statement on Jan. 20. According to DCG, a special committee of independent directors recommended and decided to file for Chapter 11 bankruptcy protection.
Statement by Digital Currency Group on Genesis Capital Chapter 11 Bankruptcy Filing
Published 12:15pm EST, Friday January 20, 2023
Yesterday, the Genesis lending entities filed for chapter 11 bankruptcy protection in the Southern District of New York.Genesis has its own independent management team, legal counsel, and financial advisors, and appointed a special committee of independent directors, who are in charge of the Genesis Capital restructuring, and who recommended and decided that Genesis Capital file chapter 11. Neither DCG nor any of its employees, including those who sit on the Genesis board of directors, were involved in the decision to file for bankruptcy.DCG will continue to operate business as usual, as will its other subsidiaries, including Grayscale Investments LLC, Foundry Digital LLC, Luno Group Holdings Ltd., CoinDesk Inc., and TradeBlock Corporation. Notably, Genesis Global Trading, Inc., Genesis’ spot and derivatives trading business, will also continue to operate business as usual.As previously described in shareholder letters, DCG owes Genesis Capital approximately $526 million due in May 2023 and $1.1 billion under a promissory note due in June 2032. DCG fully intends to address its obligations to Genesis Capital in the course of a restructuring.DCG continues to engage with Genesis Capital and its creditors to reach an amicable solution for all parties.
What happens to Genesis Capital now that it has filed for chapter 11?
Only the Genesis lending entities—Genesis Global Holdco, LLC, Genesis Global Capital, LLC (“GGC”), and Genesis Asia Pacific Pte. Ltd. (collectively, “Genesis Capital”) —have filed for chapter 11 bankruptcy protection. Notably, Genesis Global Trading, Inc., Genesis’ spot and derivatives trading entity, continues to operate business as usual. No other Genesis entities have filed for bankruptcy protection.
Chapter 11 is a chapter of the U.S. Bankruptcy Code that governs court-supervised corporate restructurings. Genesis Capital may seek to reorganize, sell its assets, or otherwise restructure its business. Genesis’ special committee of independent directors will make that decision with input from Genesis Capital’s creditors. Any restructuring will ultimately be subject to the approval of the bankruptcy court.
What does Genesis Capital’s chapter 11 filing mean for DCG?
DCG and its other subsidiaries will continue to operate business as usual. Since DCG was founded in 2015, its subsidiaries have operated as independent companies with their own management teams, financial and risk management protocols, and legal and compliance oversight. Each subsidiary has its own culture, operational structure, and incentive mechanisms. Every aspect of each subsidiary’s day-to-day business is directed by the respective subsidiary’s leadership team.
What has DCG done to help Genesis?
The $1.1B promissory note, which matures in 2032, represents DCG stepping in to help Genesis after the Three Arrows Capital default in June 2022. DCG agreed to assign and exchange Genesis’ $1.1B unsecured loan receivable from Three Arrows Capital, the recovery on which was highly uncertain, with the promissory note from DCG. DCG did not receive any cash, cryptocurrency, or other form of payment for the promissory note. DCG effectively assumed Genesis’ risk of loss on the Three Arrows Capital loan with no obligation to do so.
In addition, after Three Arrows Capital defaulted, DCG contributed approximately $340 million of new equity across Genesis entities.
How has DCG engaged with Genesis Capital’s creditors?
DCG has actively engaged with Genesis Capital’s creditors to reach agreement on a solution for all parties. Multiple proposals have been exchanged between the parties. DCG continues to engage with Genesis Capital and its creditors to reach an amicable solution for all parties.
Will DCG help Genesis Capital satisfy its debts?DCG fully intends to address its obligations to Genesis Capital. It will be the decision of Genesis Capital, its creditors, and bankruptcy officials to determine how proceeds are distributed to the Genesis Capital creditors.
What is DCG’s response to Gemini’s false accusations related to the Gemini Earn program and threat of a lawsuit?
As we previously addressed last week, this is another publicity stunt from Cameron Winklevoss to deflect blame from himself and Gemini. Any suggestion of wrongdoing by DCG or any of its employees is baseless and completely false. DCG will continue to engage in constructive negotiations with Genesis and its creditors with the goal of arriving at a solution that works for all parties.