Gemini Earn Users Could Recover Almost All Assets as Part of New Agreement – Here’s the Latest

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Ruholamin Haqshanas

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Ruholamin Haqshanas

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Ruholamin Haqshanas is a contributing crypto writer for CryptoNews. He is a crypto and finance journalist with over four years of experience. Ruholamin has been featured in several high-profile crypto...

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October 23, 2023 04:58 EDT

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Gemini Earn users may be able to recover almost all their cryptocurrency holdings as part of a new agreement between Digital Currency Group (DCG) and Genesis.

In a Wednesday filing, DCG outlined a proposal that will allow creditors to recover between 70% to 90% of their funds, with a significant portion of the recovery in digital currencies. 

“Genesis estimates that the agreement in principle will provide a 70-90% recovery for all unsecured creditors,” the filing read. 

“Today’s filing provides further clarity on the estimated return rates for Gemini Earn customers, which amount to illustrative recoveries between 95-110% of their claims.”

The proposal, formalized in August, is the second agreement in principle submitted, with the previous one suggesting DCG equity as compensation.

Under the new agreement, creditors would also have the opportunity to benefit from the appreciation of cryptocurrencies, potentially receiving amounts equivalent to “$85,000 for BTC and $8,500 for ETH.” 

DCG hopes that this additional incentive will motivate creditors to commit to the proposed deal.

Spicy bit from this morning's filing:

"Notably, Gemini Earn users are estimated to recover approximately 95-110% of their claims. This projected recovery is in the absence of any contribution from Gemini, the actual architect and agent of the Gemini Earn program."

"In other…

— Frank ChapEurro (@fintechfrank) September 13, 2023

DCG described the return rates as “remarkable” for any liquidating Chapter 11 case, especially considering the volatility of the cryptocurrency industry. 

The firm has made headlines this year due to ongoing negotiations between its subsidiary Genesis and its creditors, particularly Gemini. 

The feud between Gemini co-founders Tyler and Cameron Winklevoss and Silbert escalated when Genesis froze withdrawals from its retail lending program, Earn. 

The Winklevoss twins accused Silbert and Genesis of misleading investors, leading to investigations by the US Federal Bureau of Investigation and the Securities and Exchange Commission.

Pending a vote from creditors for implementation, the new agreement aims to renegotiate the terms of a $630 million loan between Genesis and DCG. 

The terms would involve a partial cash repayment shortly after the deal’s closure, with the remaining amount structured into a two-year note.

DCG’s Genesis owes approximately $1.1 billion to Gemini Earn users. 

Gemini Earn Creditors to Benefit From Collateral Genesis Posted to Gemini

Gemini Earn creditors are in a slightly better position compared to other creditors due to collateral that Genesis posted to Gemini during their business relationship. 

Genesis posted around 31 million shares of GBTC as collateral, which has significantly appreciated and represents about 60% of the total owed to Earn clients.

As a result, Gemini Earn creditors could potentially receive up to 110% of their total claim. 

The agreement notes that if Gemini were to contribute $100 million as promised in February or distribute even a small portion of the collateral, Gemini Earn users would undoubtedly receive a full recovery.

DCG argues that Gemini is not fulfilling its commitment, stating in the filing that the firm “is not contributing a single penny to provide Gemini Earn users a better recovery.” 

The remaining balance could be covered by assets held by Genesis, including cash, stablecoins, and payments made by DCG in the form of longer-term notes.

“DCG is extremely proud of the deal it was able to achieve with the Debtors and the UCC, and believes the rightful owners of claims, including, importantly, Gemini Earn users, should have the opportunity to vote on the deal,” DCG said.