By Michael Scott
Digital Currency Group (DCG) is ceding its equity ownership stake within Genesis’ trading firm. Handing over the trading arm to Genesis Global would ease its sale if the court approves the motion.
The revelation indicated DCG, creditors, and Genesis agreed upon the proposed restructuring that creditors would recover 80% of the trapped funds. The announcement by Genesis Global on February 6 portrays the agreement in principle to hasten the sale of the market-making and trading arm.
DCG Ceeding Brokerage Subsidiary
The announcement revealed that DCG would part away with its ownership within Genesis Global Trading to allow Genesis Global Holdco to sell the brokerage subsidiary.
Ceding the stake in the brokerage subsidiary would assemble all the Genesis-related entities within a single holding company. The agreed terms would involve DCG swapping a $1.1B promissory note maturing in 2032 to the convertible preferred stock. The transaction will enable DCG to refinance the 2023 loans to avail $526 million to settle creditors.
Ceding the stake echoes recent sale of DCG shares in Ethereum fund where it seeks to raise $22 million from disposing a quarter of its holdings. In particular, DCG is selling the share at discounted price of $8 despite each carrying a $16 claim of ether.
Gemini Injecting Millions to Earn Product
The announcement indicated that crypto exchange Gemini would inject $100 million into the Gemini Earn clients whose funds remain frozen in the bankrupt Genesis firm. The conclusion of the transactions obliges the parties to seek the court’s approval. The agreement obliges Genesis Global Holdco to divest the Genesis Global Trading firm.
A recent user update conveyed by Genesis creditors on February 6 indicated that creditors would realize a recovery rate of $0.80 for every dollar deposit. A subsequent Donut crypto yield protocol statement echoed the revelation that would see Genesis work towards the $1 path.
The statement demonstrated that the recovery rate relies on the equity note and prices attained during liquidation. Also, the recoverable amount will vary relative to the unknown costs attributed to concluding the remaining bankruptcy proceedings.
Advanced Recovery from Bankruptcy Proceedings
Meanwhile, Genesis acknowledged advancing the restructuring process given that it constitutes a critical process under the Chapter 11 bankruptcy proceedings. The proceedings stem from the calamitous FTX downfall that plunged Genesis into a liquidity crisis in November.
The liquidity crisis led Genesis Global Holdco to file Chapter 11 protection in a January 20 filing. Documents annexed to the court filing indicated that crypto contagion worsened Genesis liquidity position following the collapse of 3AC and FTX.
The sale of Genesis Global Trading is not surprising considering its exclusion from the Chapter 11 filing. Genesis Global Holdco explained that the trading arm would retain trading operations.
Subsequent communication in January from Genesis attorneys assured creditors that the firm prioritized seeking a resolution to the disputes. During the presser, the attorney portrayed optimism about restructuring to recover from the Chapter 11 proceedings by May.
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