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DCG responds to Genesis bankruptcy: In contact with creditors, will help repay debt

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In its statement, DCG confirmed the apparent separation between DCG and Genesis.

Statement by Digital Currency Group on Genesis Capital Chapter 11 Bankruptcy Filing

Source: Digital Currency Group

Heimi, Bai Ze Research Institute

Digital Currency Group, parent company of Genesis and Grayscale. (DCG) Issued a statement on Jan. 20 commenting on the news that Genesis had filed for Chapter 11 bankruptcy protection.

Bitcoin climbed above $21,000 after the announcement, hitting a 2023 year-to-date high of $21,912.

The fate of DCGS is cited by crypto enthusiasts as an important catalyst for further downside in the current cryptocurrency bear market. However, with the potential liquidation of assets, DCG's announcement appeared to allay fears of an imminent bitcoin crash.

Genesis and Gray Grayscale They're all subsidiaries of DCG. Genesis Based largely on its demonstrated balance sheet/risk management, it borrows cheaply and lends at high interest rates. Genesis was the best managed and largest centralized crypto lender before this incident, and it should be able to build on that reputation to secure funding at attractive borrowing costs. Genesis would lend Bitcoins to companies such as Three Arrow Capital and BlockFi, which had already exploded. Companies such as Three Arrow Capital and BlockFi would then turn around and give the borrowed Bitcoins to Grayscale to create GBTC stock. As a result of Genesis and Gray Grayscale They are all subsidiaries of DCG Group, so the whole mechanism is like a game of left hand versus right hand, which earns interest from companies like Three Arrow Capital and BlockFi, while transferring the risk to them.

Companies such as Three Arrow are involved in the deal because the GBTC shares they create command a premium on the open market. The reason is that it takes six months for GBTC shares to be created. During the bull market, demand for GBTC shares continues to increase, but only shares created six months ago can be sold. This results in short supply of GBTC. Retail investors are eager to gain exposure to Bitcoin rather than bother to buy it in person, and are willing to pay a premium for the tight GBTC.

In its statement, DCG confirmed the apparent separation between DCG and Genesis.

"Genesis has its own independent management team, legal counsel and financial advisers, and has appointed a special committee of independent directors to oversee the restructuring of Genesis Capital."

DCG and its other subsidiaries, including Grayscale Investments LLC, Foundry Digital LLC, Luno Group Holdings Ltd., CoinDesk Inc., will continue to operate as usual. And TradeBlock Corporation. Notably, Genesis' spot and derivatives Trading business, Genesis Global Trading, Inc. And will continue to operate as usual.

DCG disclosed debt owed to Genesis Capital of approximately $526 million with a maturity date of May 2023 and a promissory note of $1.1 billion with a maturity date of June 2032.

The statement also included a question-and-answer section:

Now that Genesis Capital has filed for Chapter 11, what happens to it?

Only Genesis lending entities - Genesis Global Holdco, LLC, Genesis Global Capital, LLC (" GGC " ) and Genesis Asia Pacific Pte. Ltd. (collectively, " Genesis Capital "). ) -- filed for Chapter 11 bankruptcy protection. Notably, Genesis Global Trading, Inc., Genesis's physical and derivatives trading entity. Continue to operate as usual. No other Genesis entity has filed for bankruptcy protection.

Chapter 11 is the chapter of the U.S. bankruptcy code where a corporate reorganization is overseen by a competent court. Genesis Capital may seek to restructure, sell its assets or otherwise restructure its business. A special committee of independent directors of Genesis will make this decision based on input from Genesis Capital creditors. Any restructuring would ultimately require approval from the bankruptcy court.

What does the Genesis bankruptcy mean for DCG?

DCG and its other subsidiaries will continue to operate as usual. Since DCG's inception in 2015, the subsidiaries have all operated as independent companies with their own management teams, financial and risk management protocols, and legal and compliance oversight. Each subsidiary has its own culture, operating structure and incentive mechanism. Every aspect of the day-to-day business of each subsidiary is guided by its respective subsidiary's leadership team.

What did DCG do for Genesis?

The $1.1 billion promissory note due in 2032 represents DCG stepping in to help Genesis after Three Arrows Capital defaulted in June 2022. DCG agreed to transfer and exchange Genesis's $1.1 billion unsecured loan receivable from Three Arrows Capital. DCG effectively assumed the risk of Genesis losing money on the Three Arrows Capital loan, but was under no obligation to do so.

How does DCG approach Genesis Capital's creditors?

DCG actively engaged with Genesis Capital's creditors to agree on a solution for all parties. A number of proposals were exchanged.

DCG will help. Genesis Capital Pay off the debt?

DCG intends to meet its obligations to Genesis Capital in full.

What is DCG's response to Gemini's false allegations and threats of litigation in connection with the Gemini Earn program?

As we noted last week, this is yet another publicity stunt by Cameron Winklevoss to deflect user blame from himself and Gemini. Any insinuation by Gemini of wrongdoing by DCG or any of its employees is baseless and completely false. DCG will continue to engage in constructive negotiations with Genesis and its creditors to reach a solution that works for all parties.

DCG's full statement:

https://dcgupdate.com/