Genesis Global Holdco LLC, the crypto lender in financial distress that filed for bankruptcy earlier this year, has launched a lawsuit against its parent entity, Digital Currency Group (DCG), along with DCG International Investments Ltd.
This lawsuit has been officially lodged in a New York bankruptcy court, with the primary objective being the recovery of a substantial sum, amounting to $620 million.
This sum includes not only unpaid loans but also various related expenses and charges. Concurrently, conversations to potentially resolve this complex legal dispute are in progress.
🚨Genesis suing DCG for $600 million🚨
$500 million in cash. 4550 BTC. ($115mm) Plus interest and late fees.
The fact that CoinDesk was the first to report on this is ironic. I feel bad my old colleagues were caught in the crossfire, and excited to see them independent. pic.twitter.com/tfbgh8k0Dv
— Ryan Selkis 🪳 (@twobitidiot) September 6, 2023
Unpaid loans and rejected debt repayment plan
Genesis Global made headlines earlier this year when it filed for bankruptcy, significantly reducing its workforce. The company recently unveiled a debt repayment plan, which, unfortunately, faced rejection from most of its key creditors despite garnering some support. In response to the mounting pressure to fulfill its repayment commitments, Genesis took the drastic step of suing DCG.
The crux of the lawsuit revolves around the claim that loans provided by Genesis to DCG remain unpaid despite having matured back in May. The outstanding loan amount is $500 million from DCG and approximately 4,550 bitcoins from DCG International Investments Ltd. In addition to the principal sum, Genesis seeks to recover accrued interest and late fees. Given the current Bitcoin price, 4,550 BTC amounts to approximately $117.1 million.
A quest for creditor support, $2.8B recovery
Genesis had proposed a restructuring deal that could offer unsecured creditors a remarkable recovery rate of nearly 90%. However, this deal hinged on securing support from key creditors, including Gemini, owned by the Winklevoss Twins.
— Reuters (@Reuters) August 29, 2023
The proposed plan called for certain creditors to provide additional funds to Genesis, enabling them to expedite repayment to other creditors in return for a more substantial share of the amount recovered through the lawsuit against DCG. According to people familiar with the matter, this plan could result in a colossal recovery of $2.8 billion if successful.
It’s worth noting that Gemini has expressed its support for the plan and is actively rallying other creditors to join forces in maximizing the returns from the lawsuit against DCG. The extent to which the lawsuit is integrated into Genesis’ overall strategy remains uncertain.
Genesis Global Trading’s U.S. spot trading exit
In tandem with its legal battle against DCG, Genesis Global Trading, an affiliate of DCG, has announced its decision to wind down its U.S.-based spot trading crypto services by Sept. 18. Per Metanews, while the official statement cited “business reasons” for this move, it aligns with the challenges the company has recently faced.
Genesis Trading's U.S. Spot Crypto Shutdown Raises User Suspicion
— MetaNews.com (@metanews_com) September 7, 2023
The Q2 report from Genesis highlighted the issues surrounding “spot market liquidity,” with a notable shift towards derivatives trading anticipated as the future growth sector for crypto trading volumes. In addition, the company mentioned its collaboration with regulatory authorities to ensure an orderly discontinuation of services, hinting at regulatory constraints as a key factor influencing this decision.
Genesis Global Holdco LLC’s lawsuit against Digital Currency Group marks a significant development in the ongoing financial turmoil faced by the crypto lender. As Genesis seeks to recover $620 million in unpaid loans and associated costs, the outcome of this legal battle will have far-reaching implications for both companies and the broader cryptocurrency industry.
Simultaneously, Genesis Global Trading’s decision to withdraw from U.S.-based spot trading services underscores the industry’s regulatory challenges.