Digital Currency Group (DCG), a crypto investment firm and the parent company of bankrupt lender Genesis Global, has proposed a plan to creditors that could see users who invested in crypto exchange Gemini’s earn program recover nearly all of their claims.
The plan, which was filed on Sep. 13, estimates unsecured creditors of Genesis Global would have a recovery rate of between 70% and 90% of their assets with “a meaningful proportion” of those assets in digital currencies.
The firm estimates that Gemini Earn users could get back all of their assets with a recovery rate estimated at between 95% to 110%.
“A remarkable outcome for any liquidating chapter 11 case, let alone one liquidating a business in the volatile and deeply distressed cryptocurrency industry,” said DCG in the filing. It compared the recovery rates to those of recent Chapter 11 bankruptcy cases, which come in at 48.5% on average, and tend to be much lower for other crypto Chapter 11 bankruptcy cases, such as the ongoing Voyager and BlockFi cases.
In the filing, DCG criticized Gemini for its lack of contribution to the plan, after it committed earlier in the year to contribute $100 million in cash towards the restructuring proposal.
“This failure by Gemini to ‘put its money where its mouth is’ while it touts its purported dedication to providing Gemini Earn users a full recovery is inexplicable,” the filing said. “It also is particularly disingenuous in light of Gemini’s earlier agreement to contribute $100 million in cash to fund the restructuring proposal memorialized on Feb. 10, 2023.”
If Gemini did commit $100 million to the recovery fund, DCG said, “there would be little doubt Gemini Earn users would receive more than full recovery.” Gemini did not immediately respond to a request for comment.
Genesis Global filed for bankruptcy at the start of this year. Its main creditor is crypto exchange Gemini, which used the lender for its earn program known as Gemini Earn. There’s been a contentious battle between the two companies, with the co-founders of Gemini, Tyler Winklevoss and Cameron Winklevoss, accusing DCG founder Barry Silbert and Genesis of misleading investors in a July lawsuit. Reuters recently reported that US authorities are probing Tyler and Cameron over the claims they made. The U.S. Securities and Exchange Commission (SEC) also charged both firms with the sale of unregistered securities.
Within DCG’s plan is an outline of the math for the recovery of assets for Gemini Earn customers, which is based on the returns from the Genesis bankruptcy estate and 30 million shares of the Grayscale Bitcoin Trust (GBTC), which was provided as collateral from Genesis to Gemini. The GBTC shares are worth approximately $607 million, according to the filing.
GBTC shares are currently trading at a discount of around 17.17% to bitcoin’s price, recouping some of its losses from this year and late last year. The last time GBTC traded around this range was in the middle of 2021, which was during the crypto bull market.
Grayscale’s GBTC got a boost when the firm won its lawsuit against the SEC over its denial to convert the bitcoin trust to an ETF. Many other leading investment firms have also applied for approval from the SEC to launch a spot bitcoin ETF.
This proposal still needs to be voted on and if approved, distributions could start being made to creditors shortly afterward.