DCG, Genesis Creditors Hatch Plan to Resolve Liquidity Crisis

A creditor’s committee formed by crypto exchange Gemini has proposed a plan to recover assets from Genesis and its parent company Digital Currency Group (DCG).

According to a tweet by Gemini president and co-founder Cameron Winklevoss, New York-based investment banking firm Houlihan Lowkey has presented a plan on behalf of the creditor committee to “resolve liquidity issues” at Genesis and DCG and provide a “path for the recovery of assets,” with an initial response from both companies expected this week.

Earn Update: Today, Houlihan Lokey presented a plan on behalf of the Creditor Committee to resolve the liquidity issues at Genesis and DCG and provide a path for the recovery of assets.
— Cameron Winklevoss (@cameron) December 20, 2022

Shortly after the collapse of FTX, Gemini told its users on November 16 that it would be pausing withdrawals from it high-yield Gemini Earn service, citing “unprecedented turmoil.” The move came after Genesis, Gemini’s lending partner for Gemini earn, suspended redemptions for customers and new loans due to “abnormal withdrawal requests” as a result of the FTX fallout.

Genesis had revealed that it was exposed to FTX by at least US$175 million, via its derivatives trading business.

As part of our goal in providing transparency around this week’s market events, the Genesis derivatives business currently has ~$175M in locked funds in our FTX trading account. This does not impact our market-making activities.
— Genesis (@GenesisTrading) November 10, 2022

Earlier this month, the Financial Times reported that Genesis and DCG owe customers of Gemini US$900 million. DCG, which owns Genesis Trading and cryptocurrency asset manager Grayscale, owes US$575 million to Genesis’ crypto lending arm, chief executive Barry Silbert said in a letter to shareholders last month.

Coindesk previously reported that creditor groups in negotiation with Genesis currently account for some US$1.8 billion of loans, with the number likely to continue growing.

Silbert had also attempted to allay fears, saying that despite the market downturn, the overall company is on pace to generate US$800 million in revenue this year on the back of just $25 million raised in primary capital since inception.

Read more: DCG – Et Tu, Barre?

“We have weathered previous crypto winters,” Silbert wrote, adding that “while this one may feel more severe, collectively we will come out of it stronger.”

However, according to a New York Times article that cited three people familiar with situation, Genesis has hired investment bank Moelis & Company to explore options including a potential bankruptcy.