Derar Islam, interim CEO of Genesis Global Holdco LLC, assured creditors such as Gemini that the firm’s bankruptcy will proceed “quickly and efficiently”.
Writing to investors shortly after Origin filed for Chapter 11 bankruptcy in the U.S., Islam said in a letter seen by The Block, “Our goal is to reach the best outcome possible through the Chapter 11 process and emerge well as soon as possible.” The goal is to move quickly and efficiently. -Posted for the future. Islam assumed leadership of the lending firm in August 2022 following the resignation of former CEO Michael Morrow.
Genesis owes $3.6 billion to top 50 creditors
Genesis filed for Chapter 11 bankruptcy on January 20, 2023, following a massive liquidity crunch after hedge fund Three Arrows Capital defaulted on a $2.4 billion loan. It suspended withdrawals and origination of loans till November 16, 2022.
As per the filing, the company has over 100,000 creditors. It reportedly owes about $3.6 billion to its top 50 unsecured creditors.
Genesis owes an estimated $900 million to Gemini Earn customers, approximately $303 million to Amsterdam-based exchange Bitvavo, $150 million to Moonalpha Financial Services and $30 million to Plutus Lending. Other contenders include VanEck’s New Finance Income Fund and crypto trading firm Cumberland. While Cumberland claims approximately $18 million in the Genesis filing, the crypto trader claims Genesis is owed approximately $46,000.
Prior to filing for bankruptcy, Genesis transferred $150 million to several central exchanges including Binance, Kraken, and Coinbase, which could allow itself to operate during bankruptcy.
Who’s to Blame for the Gemini Earn Fiasco?
Gemini co-founder Cameron Winklevoss has threatened legal action against Genesis owner Digital Currency Group (DCG) and its CEO Barry Silbert if Gemini customers do not receive fair treatment from bankruptcy proceedings.
The DCG described his threat as “another publicity stunt by Cameron Winklevoss to deflect blame from himself and Gemini.”
alleged origin due Over 340,000 Gemini customers earn approximately $900 million. Earn Customers lent their assets to the originator to generate the yield. In his capacity as an agent, Gemini reaped 4.29% of the returns.
According to Axios, Gemini confirmed in response to an SEC lawsuit that customers are aware of the risk of “total loss”.
However, the customer experience with Gemini’s customer service is referred to as FDIC insured, which removes any fear of autocracy.
Gemini customer service told Peter Chen, who invested approximately $18,000 in the account, “All fiat currency held by Gemini to redeem your GUSD is held in a secure account by our partner financial institutions and is eligible for FDIC insurance.” Huh.” GUSD is Gemini’s stablecoin, while FDIC insurance refers to the Federal Deposit Insurance. FDIC insurance is a safety net that protects depositors from bank-run scenarios.
While its registration with the New York State Department of Financial Services mandates it to have a certain capital requirement, Gemini is not regulated like a bank. Hence, customers risked an illiquidity scenario while depositing their money.
Small investors like Chen could wait a long time to get their money. A $1.1 billion promissory note maturing in 2032 that Silbert promised to help with Genesis’ liquidity is not callable. Another $526 million that DCG will have to pay Genesis by May 2023 also doesn’t guarantee that Gemini customers will be reinstated any time soon.
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