The Ad Hoc
Group, a group of creditors claiming approximately $2.4 billion against
bankrupt digital asset lender, Genesis, has opposed the in-principle agreement reached between Digital
Currency Group (DCG) and the Committee of Unsecured Creditors (UCC).
A court
document filed yesterday (Tuesday) shows that DCG, the parent company of
Genesis, agreed to pay $275
million before
Genesis’ Chapter 11 bankruptcy plan becomes effective. The blockchain-focused
venture capital company also tentatively agreed to pay approximately $328.8 million in
“first-lien” debt two years after the plan
receives the court’s go-ahead.
Furthermore,
DCG proposed to make a payment of around $830 million seven years after the
plan was kicked off. This
payment is to comprise 55% in US dollars and 45% in Bitcoin and Ethereum, two of the world’s foremost digital currencies. The long-term commitment comes
with an interest rate of 6%.
However, in
a separate court filing also entered yesterday, the Ad
Hoc Group described the proposed amounts as “wholly insufficient”. They also
criticized the item in the in-principle agreement that grants
“non-consensual third-party releases” to DGC. This proposed clause
means that DCG will be exempted from any claims or liabilities that could be
brought against it by creditors such as the Ad Hoc Group.
Background
In January,
Genesis filed for
bankruptcy protection in New York after the collapse of crypto hedge
fund, Three Arrows Capital
(3AC), and
cryptocurrency exchange, FTX, threw its business into a liquidation
crisis, Finance Magnates reported.
According to the Ad Hoc Group, Genesis had a $2.3 billion exposure to 3AC. However, after liquidating
collateral in its possession, the crypto lender reduced
the 3AC-related
losses to $1.2 billion.
Despite
these losses, Genesis allegedly continued to solicit hundreds of millions in
additional loans from creditors, including many members of the Ad Hoc Group.
Furthermore, DCG reportedly issued a promissory note of $1.1 billion payable to
Genesis only in 2032 at an annual interest rate of 1%. However, the Genesis
parent company allegedly framed this written promise as a “near-term
receivable”.
As a result
of Genesis’ losses, DCG is supposed to pay approximately $630 million in
May 2023 to Genesis’ creditors. However, it has…
