Critique on DCG’s Recovery Plan
Contrived and Misleading Assertions
In a filing with the U.S. Bankruptcy Court for the Southern District of New York on September 15, Gemini’s legal representatives accused DCG of gaslighting Genesis creditors with “contrived, misleading, and inaccurate assertions”. They claim that DCG’s recovery plan, submitted to the bankruptcy court on September 13, gives an illusion that unsecured creditors could recover 70–90% of their claims with a substantial portion paid in digital currencies. According to the plan, Gemini Earn users might even expect a 95–110% recovery.
The lawyers argue that DCG is luring the Gemini Lenders into a deal where they would accept considerably less than they are owed. They urge the company to substantially improve the loan terms provided to Genesis and not to leverage Genesis’s bankruptcy proceedings to justify their recovery plan.
Allegations of Deception
The filing reads, “To distract the Genesis creditors from the inconvenient facts of its facially inadequate and inequitable proposal, DCG touts proposed recovery rates that are a total mirage — misleading at best and deceptive at worst.” They further stressed that the Gemini Lenders will not receive anything close to the proposed recovery rates in real value terms under the current agreement in principle.
Genesis Financial Tangle and Bankruptcy
The Genesis Bankruptcy Case
The legal row engages cryptocurrency exchange Gemini and DCG in a tussle over the Gemini Earn program, partly financed by Genesis. Citing “unprecedented market turmoil”, Genesis halted withdrawals in November 2022, following the collapse of FTX. In January 2023, they filed for bankruptcy.
Court documents filed by Gemini indicate that at the time of its Chapter 11 filing, Genesis owed over $3.5 billion to the top 50 creditors. Gemini, intent on recovering more than $1.1 billion in assets for nearly 232,000 Earn users, filed a lawsuit against DCG and its CEO Barry Silbert in June, alleging fraud.
Key Points
What is the proposed recovery plan by DCG?
DCG’s recovery plan for Genesis suggests that unsecured creditors could recover 70–90% of their claims, while Gemini Earn users might expect 95–110% recovery.
What is Gemini’s stand on this?
Gemini’s legal team criticizes the plan, alleging that DCG is attempting to pay less than they owe and are presenting a false impression of potential recovery rates.
Why did Genesis file for bankruptcy?
Genesis had to file for bankruptcy in January 2023 after halting withdrawals in November 2022, following the collapse of FTX.
What does Gemini aim to recover?
Gemini filed a lawsuit against DCG and its CEO Barry Silbert to recover more than $1.1 billion in assets for nearly 232,000 Earn users.
