Genesis Global reaches settlement with parent DCG, amends plan

By Sarah Lizee

Olympia, Wash., Nov. 30 – Genesis Global Holdco, LLC said it has reached a settlement with parent company Digital Currency Group (DCG) and has amended its Chapter 11 plan and disclosure statement, according to documents filed with the U.S. Bankruptcy Court for the District of Delaware.

Genesis had filed an adversary proceeding against DCG in September in an attempt to recover more than $620 million in unpaid loans. The parties later entered into a partial repayment agreement.

As part of the agreement, on Sept. 13, Oct. 3 and Oct. 20, DCG paid the debtors around $177.82 million in cash and about 1,885 Bitcoin.

Through the settlement, DCG has agreed to repay remaining amounts due to Genesis, nearing $325 million, by April 2024.

Amended plan

As background, since November 2022 the company has been trying to work with its creditors and stakeholders, including the official committee of unsecured creditors and an informal creditor group, Gemini Trust Co., LLC and DCG, to reach a consensual resolution of the debtors’ financial situation.

The company filed its initial Chapter 11 plan on Jan. 23, 2023 to provide a framework for a confirmable plan even in the absence of a global settlement.

Following further negotiations, the company filed an amended plan on June 13, reflecting an agreement on key issues among the debtors, the committee and the informal creditor group. The June plan proposed to provide the distribution of the debtors’ cash and digital assets on hand to creditors and the subsequent pursuit of causes of action, including preference claims and litigation claims against DCG, after the plan’s effective date.

The debtors and the committee further continued with negotiations with DCG and the informal creditor group after the June plan was filed, including bringing the parties together for further mediation sessions in August.

On Aug. 23, the mediation was terminated, and Genesis filed an agreement in principle among the debtors, the committee and DCG, through which DCG had agreed to enter into a new first-lien facility, new second-lien facility and the partial repayment agreement in satisfaction of debt to Genesis.

The informal creditor group did not support the agreement. And ultimately, Genesis was unable to reach an agreement with DCG on final debt terms.

Further complicating matters, on Oct. 19, the Office of the New York Attorney General filed a lawsuit against some of the Genesis debtors, DCG and Gemini and other related parties alleging that they defrauded investors.

Given the relief sought in the NYAG action, the debtors and the committee determined that pursuing the agreement in principle with DCG while the NYAG action is pending is not a viable route.

As such, the debtors are pursuing the amended plan, which incorporates the key concepts of the June plan with additional modifications.

The amended plan contemplates that holders of allowed general unsecured claims against the debtors will receive a combination of, among other things and subject to some conditions, cash, digital assets, avoidance recoveries, proceeds resulting from the sale of assets of the wind-down debtors and proceeds from obligations of the DCG parties.

The plan also provides for payment in full of all allowed administrative expense claims, priority tax claims, other priority claims and professional fee claims.

A litigation reserve that allocates a fixed amount of funds to enable the pursuit of litigation of any retained causes of action will be funded under the plan.

Subject to applicable law and conditions, holders of allowed claims denominated in digital assets will receive in-kind distributions in the form of the digital asset in which their respective claims are denominated.

Genesis Global is a New York-based cryptocurrency lender that filed bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York on Jan. 19, 2023 under Chapter 11 case number 23-10063.

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