Digital Currency Group (DCG), the parent company of Genesis Capital, has provided an update stating that no solution has been reached yet regarding the outstanding intercompany obligations that would enable the reimbursement of creditors.
The announcement, made on May 9, revealed that DCG and Genesis are currently in a 30-day mediation period in response to the demands raised by creditors. Back in February, DCG proposed a settlement plan that would have seen Genesis creditors recovering 80% of their funds after the firm filed for Chapter 11 bankruptcy.
However, in April, Genesis creditors increased their demands, leading to disruptions in the bankruptcy proceedings and the previously agreed “agreement in principle” between the two companies. When Genesis filed for bankruptcy, it reported liabilities ranging from $1 billion to $10 billion.
DCG stated that it is simultaneously engaging in discussions with capital providers to explore growth capital and refinancing options for its outstanding intercompany obligations with Genesis, in order to enhance its financial flexibility. The company expressed its commitment to achieving a fair outcome for all parties involved and looks forward to a productive resolution during the mediation period.
In the aftermath of Genesis’ bankruptcy, legal issues between DCG and the crypto exchange Gemini have arisen. DCG and Genesis reportedly owed approximately $900 million to Gemini’s clients who were locked out of their Earn funds, as Genesis operated the program in partnership with Gemini. In January, Cameron Winklevoss, co-founder of Gemini, threatened to file a lawsuit against DCG and CEO Barry Silbert if they couldn’t offer Gemini creditors a fair deal.
Authorities in the United States have also taken action in response to the financial troubles of these businesses. In January, the Securities and Exchange Commission charged Genesis and Gemini with offering unregistered securities, while the New York State Department of Financial Services reportedly launched an investigation into Gemini regarding its Earn program.
The 30-day mediation period grants DCG and Genesis until the end of May to reach a resolution on the proposed restructuring plan. Genesis, in its initial Chapter 11 filing, stated its intention to sell its assets at auction and exit bankruptcy by May 19.
