A subsidiary of Barry Silbert’s Digital Currency Group (DCG) that collapsed during the last crypto winter has started repaying its creditors after completing bankruptcy restructuring.
Genesis Global, along with affiliate companies, has already commenced the distribution of approximately $4 billion in digital assets and cash to creditors in accordance with the Chapter 11 bankruptcy plan, according to a new press release.
Bitcoin creditors will recover 51.28% in BTC while Ethereum (ETH) creditors will get 65.87%.
Meanwhile, altcoin creditors, except Solana holders, will receive 87.65% recoveries, on average. Solana creditors will recover nearly 30% of their holdings.
US dollar and stablecoin creditors will recover 100% of their holdings to be paid in USD.
The statement says creditors may get additional recoveries after the initial distribution depending on the outcome of ongoing claims reconciliation, contractual rights against third parties and litigation.
Litigation Fund
“As part of the Plan, creditors have established a $70 million litigation fund to pursue causes of action against various third parties, including Digital Currency Group, which is Genesis’ corporate parent. The $70 million litigation fund will consist of $26 million in BTC, $13 million in ETH, and $31 million in USD.”
In February, DCG objected against the bankruptcy plan saying it would give greater distribution to certain creditors and leave nothing for equity holders.
But the court ruled that Genesis has “nowhere near enough assets” to allow the venture capital firm to recover from the bankruptcy.
Genesis’s Downfall
Genesis customer funds had been frozen since November 2022 when the now-bankrupt crypto lender halted withdrawals due to liquidity problems caused by the collapse of crypto hedge fund Three Arrows Capital.
As part of the plan, Bitcoin (BTC) creditors “will receive 51.28% recoveries as valued on an in-kind basis in the form of BTC,” and Ether (ETH) creditors will receive 65.87% recoveries paid out in the digital currency.
Altcoin and Stablecoin Recovery Rates
Most altcoin creditors will receive 87.65% recoveries of their digital assets, with Solana (SOL) being the notable exception. Creditors reclaiming SOL holdings will be subject to a 29.58% recovery rate, once again payable on an in-kind basis. Stablecoin and cash creditors are eligible to recoup 100% of their losses in the form of US dollars, according to the restructuring plan.
Legal Action Fund
A $70 million litigation fund for creditors seeking further legal action against any third parties to the bankruptcy, such as Genesis’ parent company Digital Currency Group (DCG), has also been established.
Genesis engaged in institutional lending, borrowing funds from firms like the Winklevoss twins’ Gemini and lending it to firms like Three Arrows Capital.
Public Feud
The fallout from the Three Arrows Capital default drove a wedge between Gemini co-founder Cameron Winklevoss and Digital Currency Group CEO Barry Silbert. Winklevoss has publicly slammed the DCG CEO on several occasions, accusing him of fraud and an inability to run the corporate conglomerate, which is the parent company of Grayscale, Foundry, Luno and Genesis.
More recently, Genesis agreed to a $21 million settlement with the Securities and Exchange Commission for allegedly selling unregistered securities alongside the Geminin Earn program.
SEC’s Statement
Following the settlement, SEC chief Gary Gensler remarked that all cryptocurrency lending providers and other digital asset services need to comply with existing securities laws.
Conclusion: A Long Road to Recovery
At the time, the firm reported owing over $3.5 billion to its top 50 creditors.
According to Arkham Intelligence, on-chain data shows the firm has started repaying its creditors, with a wallet linked to the billionaire Mark Cuban receiving $19.9 million in ETH from Genesis.
This followed the blockchain analytical platform’s earlier report that Genesis had moved 16,600 BTC, equivalent to $1.1 billion, and 166,300 ETH, valued at $521.1 million, in multiple transactions on Aug. 2 for other creditor claims.
Lookonchain pointed out that the repayment process began earlier in the week, with Genesis shifting around $3 billion in crypto — 32,256 BTC (valued at approximately $2.12 billion) and 256,775 ETH (worth about $838 million) — in three days.
This event is another reminder of the volatility and risks associated with the cryptocurrency industry, as even established companies can face severe financial difficulties in the face of market downturns. It also underscores the need for greater transparency and accountability within the industry.
