Genesis Creditors Prepack Bankruptcy Deal
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An editor at Coincrop
19 Jan 2023 | 4 min read
wo sources with insider knowledge of the discussions have revealed to The Block that creditors at Genesis Global Capital are collaborating on a pre-packaged bankruptcy plan.
The Winklevoss twins' creditors, Gemini included, will accept a forbearance period with most of the payments ranging between one to two years as part of their prearranged bankruptcy plan. For this agreement to be made possible, creditors will receive cash compensation and equity in Digital Currency Group- Genesis's parent company - according to an insider source.
Last year, Gemini assembled an ad hoc committee to come together with other creditors and pressure Genesis for a resolution after it prevented its users from withdrawing funds. For several weeks, the creditor committee has been secretly talking to Genesis in pursuit of completing a Chapter 11 bankruptcy protection plan prior to filing.
Cameron Winklevoss, the co-founder of Gemini, has been publicly clashing with Barry Silbert - the head of Digital Currency Group's parent company Genesis. He accused him of combining funds inappropriately at DCG, dealing in bad faith and heavily demanded his resignation from Digital Currency Group as its highest executive in a recently penned open letter.
Vincent Buccola, who studies and educates bankruptcy law reform at Wharton Business School, believes that filing Chapter 11 provides an opportunity for businesses to cooperate with their creditors in order to preserve the overall financial position. In other words, it creates a breathing room so both parties can work together towards saving the economic enterprise.
By working with creditors to negotiate the terms of a plan prior to filing for bankruptcy, a prepackaged filing can expedite the process and help debtors emerge from bankruptcy protection more swiftly.
On November 16th, Genesis Global Trading's ceased all withdrawals and loan originations from its lending partner due to the meltdown of FTX. Shockingly, $175 million in derivatives were stuck in FTX after it went under; this is a devastating blow for the company as they had previously been affected by 3AC hedge fund bankruptcy too.
In December, Houlihan Lokey, a company specialized in finance and investments services, developed a liquidity plan with the goal of providing relief to Genesis and DCG's creditor committee.
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