Since Genesis abruptly halted withdrawals in November 2022, DCG CEO Barry Silbert and Gemini’s Winklevoss twins have been locked in a high-profile back-and-forth on Twitter, as brothers publicly accused Silbert of engaging in “bad faith stall tactics” and defrauding Gemini’s customers. In response, DCG called Winklevoss’ claims false and defamatory.
Genesis, one of DCG’s subsidiaries along with Grayscale Investments, Luno, Foundry, and CoinDesk, was the primary partner for Gemini’s Earn service, which allowed users to receive up to 8% yield on their cryptocurrency deposits. The promise of a lucrative interest attracted $900 million from 340,000 Gemini users, who then saw their funds stuck in limbo after Genesis filed for Chapter 11 bankruptcy on January 19. But with today’s agreement, Gemini customers are now one step closer to recovering their funds, although it’s still unclear whether and when they will be made full.
"Today, @Gemini reached an agreement in principle with Genesis Global Capital, LLC (Genesis), @DCGco, and other creditors on a plan that provides a path for Earn users to recover their assets," Cameron Winklevoss tweeted Monday. "This agreement was announced in Bankruptcy Court today."
Under the new restructuring deal, Gemini will contribute up to $100 million to compensate Earn customers who saw their funds frozen on the platform. Cameron Winklevoss has already called the plan “a critical step towards a substantial recovery” for all Genesis creditors. However, no further details were provided, and it was not specified how many cents on the dollar Gemini Earn users are expected to recover and when.
For its part, DCG will refinance its approximately $500 million in loans owed to Genesis through a new, junior secured term loan in two tranches, one denominated in dollars and the other in Bitcoin. The parent company will also exchange its existing $1.1 billion promissory note due in 2032 for convertible preferred stock that will be issued as part of Genesis’ Chapter 11 plan.
The creditor pact also indicates DCG’s intent to sell Genesis’ crypto trading business, as well as its lending arm, CoinDesk reported Monday. Like Genesis, CoinDesk is also owned by DCG, but now it is now considering a partial or full sale to remove itself from the troubled parent company.
DCG has “actively engaged with Genesis and its creditors to reach a fair and equitable resolution. We are pleased to help Genesis reach this agreement with all the creditors that opted to participate in the process,” the company’s spokesperson said, quoted by Bloomberg.
“I am grateful to the talented team at Genesis for their ongoing dedication and commitment to client service, and excited about working together to build Genesis for the future,” Derar Islim, Genesis’ interim CEO, said in a press release. “I also want to express my deep appreciation to all of our clients for their continued patience and loyalty as we work through a resolution for our lending business.”
Both Genesis and Gemini still have to settle charges with the U.S. Securities and Exchange Commission over unregistered security offering through their joint Gemini Earn product. The SEC filed a complaint just a week before Genesis declared bankruptcy, alleging that the program “constitutes an offer and sale of securities under applicable law and should have been registered with the Commission.”