Gemini Earn Updates

In addition to the approval of Genesis’s Amended Disclosure Statement earlier this week (see November 30 update, below), there were several other important advances in the Genesis bankruptcy:

• At a November 30th hearing, Judge Lane authorized Genesis to enter into a settlement with the joint liquidators of Three Arrows Capital (3AC), resolving a significant contingent liability of the Genesis estate. Under the settlement agreement, 3AC will receive a $33 million allowed general unsecured claim against Genesis — a substantial reduction of the over $1 billion claim asserted by 3AC. Though the settlement provides for mutual releases between Genesis and 3AC, Genesis will retain all claims against DCG in connection with the 3AC collapse. 
  

• Genesis intends to amend its partial repayment agreement with its parent Digital Currency Group, Inc. (DCG) and DCG affiliate DCG International Investments Ltd. (DCGI). The proposed amendment to the partial repayment agreement brings substantial assets into the estate prior to the Amended Plan’s anticipated effectiveness in March, which means higher initial distributions for Genesis’s creditors, including Earn Users. Gemini is considering Genesis’s motion and whether to oppose it if further recoveries from DCG are possible on the May maturities (see August 18th and June 30th updates, below). 
  

• Genesis entered into a Plan Support Agreement (PSA), pursuant to which the Official Committee of Unsecured Creditors (UCC) and members of the Ad Hoc Group (AHG) collectively holding more than $2.1 billion in claims committed to vote to support Genesis’s Amended Plan, provided certain conditions are met. The PSA helps bring more certainty to the remainder of the Genesis bankruptcy proceeding (see March 31st update, below). An agreement among parties holding substantial claims against Genesis is a sign of progress. Gemini is not a party to the PSA – the Genesis creditors who comprise the PSA parties are largely institutional creditors to Genesis, and their interests may not be aligned with the interests of Earn Users. 
  

• Among other claims objection motions, Genesis objected to proofs of claim filed individually by certain Earn Users on the basis that they are duplicative of the Master Claim that Gemini asserted on their behalf (see June 23rd and May 26th updates, below). On Thursday, Gemini sent additional information to Earn Users affected by these objections. Genesis’s objections can be found here at docket numbers 994-996, 998-1000, and 1002-1007. 
  

• Kroll, Genesis’s claims agent, filed an additional notice regarding the third-party security incident at Kroll previously reported in August 2023. Again, Gemini did not submit any Earn Users’ personal data to Kroll when filing the Master Claim, and Kroll should not have had any Earn User personal data at the time of the breach. However, any Earn User who filed their own proof of claim against Genesis may have been impacted by this security breach at Kroll. For information regarding the third-party security incident, as well as steps you can take to help protect yourself against misuse of your personal data, please refer to Kroll’s notice. For more information on the Master Claim, see the May 26th Earn update, below. 

After months of stalled advances, the developments this week demonstrate significant forward progress in the Genesis bankruptcy case.

TL;DR - Yesterday, we reached a milestone in the process to recover Earn Users' assets. Soon you will be able to vote to 'Accept or Reject' the Amended Plan for your Earn assets. More info on how you can vote will be sent to Earn Users via email. The deadline to cast your vote will occur in January 2024, leading up to the next hearing on February 14, 2024. If the Amended Plan is confirmed by voters and accepted in February 2024, it will begin the process of returning assets to Earn Users.

Yesterday, Judge Lane approved Genesis’s Amended Disclosure Statement, which relates to Genesis’s Amended Plan. This marks a key milestone in the Bankruptcy process, whereby the Amended Plan will now be solicited for votes leading up to the plan confirmation hearing which is scheduled for February 14, 2024. The Amended Plan (if confirmed), will become effective soon thereafter. Critically, once the Amended Plan is effective, it will provide for the distribution of assets from the Genesis estate to creditors, including Earn Users.

More specifically, (1) Earn Users will receive an initial distribution of Genesis’s assets upon effectiveness and (2) at the same time, it also allows Gemini to pursue the Adversary Proceedings against Genesis seeking to recover $1.6 billion in value for the benefit of Earn Users (see November 22nd and October 27th updates, below).

Each Earn User will have the opportunity to vote to accept or reject the Amended Plan during a process known as solicitation, which will start in the coming days. Additional details regarding the solicitation process will be sent to Earn Users via email. It will include information on how Earn users can cast their votes. The voting deadline will occur in early January 2024.

This phase of the Genesis bankruptcy has been a long time coming, but we are now finally here with a timeline for initial distributions that is far firmer than anything Genesis has proposed before. We will continue to fight for Earn Users’ recoveries through the Adversary Proceedings and keep you posted as it unfolds.

The adjourned hearing on Genesis’s motion to approve the adequacy of the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan is set to resume today, November 28, 2023, at 2pm ET. You can listen to the hearing using the following dial-in information:

Dial-in: 1-929-205-6099
Access Code: 92353761344#
(Listen-only)

The adjourned hearing on Genesis’s motion to approve the adequacy of the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan is set to resume on November 28, 2023, at 2pm ET. Details for listening to the November 28th hearing can be found here.

We previously provided an update regarding Gemini’s commencement of an Adversary Proceeding against Genesis seeking to recover $1.6 billion in value for the benefit of Earn Users. Gemini asked the Bankruptcy Court to confirm that Gemini’s foreclosure on the Initial Collateral (30,905,782 shares of GBTC) was proper and to recognize the Earn Users’ rights to the Additional Collateral (31,180,804 shares of GBTC) that would make Earn Users whole (see October 27th update, below).

Today, Genesis answered our complaint in the Adversary Proceeding and, as expected, asserted several baseless and inflammatory counterclaims. Those counterclaims include claims that: (i) Genesis’s return of Earn Users’ assets during the 90 days prior to the filing of Genesis’s bankruptcy petition were preferential payments that should be clawed back from Earn Users; (ii) Gemini did not properly foreclose on the Initial Collateral; (iii) Gemini does not have a security interest in the Additional Collateral; (iv) even if Genesis pledged the Additional Collateral to Gemini, that pledge too was a voidable preference payment; and (v) Gemini is required to return the Initial Collateral because Gemini did not provide adequate consideration when the parties entered into the first amendment (First Amendment) to the security agreement (Security Agreement), making the transfer of the Initial Collateral a constructive fraudulent conveyance.

Genesis’s counterclaims are shameless, baseless attempts by Genesis to avoid its obligations under the plain language of the agreements at issue. Genesis attempts to mislead the Court and Earn Users by spinning a story that Gemini intends to benefit from the Genesis bankruptcy and keep the appreciation on the collateral it secured for the benefit of Earn Users — this is completely false. Earn Users deserve to be paid in full, and there is sufficient collateral available to accomplish that outcome. We sued Genesis to enforce the Earn Users’ rights to that collateral and achieve a full recovery. It is Genesis’s actions that have harmed Earn Users.

Genesis’ preference claims against the Earn Users are even worse — Genesis is seeking to harm even more people than are already suffering from Genesis’ failure to return borrowed assets. It is telling that the first clawback targets are not Genesis’s institutional creditors but rather the largely retail Earn User base. This attack on Earn Users is a new low, even for Genesis. Where are the preference claims against the institutional lenders that comprise the rest of the Genesis creditor base?

We will of course deny Genesis’s allegations and vigorously defend Earn Users against these counterclaims. We believe that we have strong defenses to these counterclaims, including that:

• The preference claims focused on Genesis’s return of Earn Users’ assets are legally flawed because the transactions at issue: (i) were payments in the ordinary course of business, (ii) are protected from avoidance by the Bankruptcy Code’s “safe harbor” provisions; and/or (iii) are not the type that can give rise to preference liability;

• The declaratory judgment claims are improper because they are simply defenses to Gemini’s claims, and, in any event, are baseless because Gemini conducted a valid foreclosure on the Initial Collateral and either has a security interest in the Additional Collateral or a right to that collateral because Genesis is holding it in constructive trust for the benefit of Earn Users;

• Genesis’s pledge of the Additional Collateral is not an avoidable preference because, among other reasons, the Additional Collateral was specifically earmarked for Earn Users when it was delivered to Genesis and the Bankruptcy Code’s “safe harbor” provisions protect Gemini against any avoidance with respect to the Additional Collateral; and 

• Genesis’s constructive fraudulent transfer claim should fail because, among other things, Genesis cannot establish that Gemini failed to provide reasonably equivalent value when the parties entered into the First Amendment to the Security Agreement.

It is important to note that these counterclaims are entirely expected. Genesis failed to meet its obligations and predictably, it is not doing the right thing but instead trying to advance arguments that seek to deflect their responsibility while simultaneously taking value away from Earn Users and funneling it to other creditor groups. This behavior is unfortunately par for the course for Genesis and we look forward to continuing to pursue the Adversary Proceeding against Genesis to recover assets for Earn Users as expeditiously as possible. We will keep you posted as this develops and will do everything in our power to bring this proceeding to a fair and timely conclusion.

Today, Genesis filed an Amended Plan of Reorganization (Amended Plan), the related Disclosure Statement (Disclosure Statement), and other related documents. Gemini, Genesis, and other creditors have been working since the November 7th hearing to have Genesis propose an Amended Plan that meets the interests of all creditor constituencies, including, importantly, the Earn Users (see November 10th update, below). Gemini and the Debtors were unable to reach agreement on provisions in the Amended Plan to appropriately protect Earn Users and their rights to the $1.7 billion of collateral that Gemini secured for the benefit of Earn Users. Gemini remains committed to resolving these issues prior to the Amended Plan becoming effective but equally is prepared to oppose confirmation of the Amended Plan should it unfairly impact Earn Users and their rights to the collateral or prejudice Gemini’s ability to litigate and recover, for the benefit of Earn users, in the Adversary Proceeding (see October 27th update, below).

The hearing on Genesis’s motion to approve the adequacy of the recently filed Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan will be held on November 20, 2023 at 2pm ET. Details for listening to the November 20th hearing can be found here.

This week, Kroll, Genesis’s claims agent, advised Genesis creditors that the third-party security incident at Kroll previously reported in August 2023 may have impacted personal data submitted in connection with the claims process in Genesis’s chapter 11 case. Again, Gemini did not submit any Earn Users’ personal data to Kroll when filing the Master Claim, and Kroll should not have had any Earn User personal data at the time of the breach. However, any Earn User that filed its own proof of claim against Genesis may have been impacted by this security breach at Kroll. For information regarding the third-party security incident, as well as steps you can take to help protect yourself against misuse of your personal data, please refer to the Notice of Communication to Claimants. For more information on the Master Claim, see the May 26th Earn update, below.

Gemini remains committed to bringing recoveries to Earn Users as soon as possible. The next step is obtaining approval of the Disclosure Statement so that creditors, including Earn Users, can vote to accept or reject the Amended Plan.

Since our last update, Genesis has made progress presenting a plan of reorganization that can be solicited for votes in late November and set up for confirmation in January with distributions soon thereafter. During the hearing this past Tuesday, Genesis and the objecting parties discussed remaining disclosure and plan objections and the paths to resolve them. Gemini continues to work with Genesis and the other parties on amendments to the current version of the Plan. The purpose of these amendments are to ensure that (1) Earn users are not harmed by the proposed Plan’s treatment of the Earn users’ claims and that (2) the Adversary Proceeding initiated by Gemini, regarding $1.7 billion of collateral that Gemini secured for the benefit of Earn users, can be fully litigated without prejudice (see October 27th update, below).

Judge Lane continued the Disclosure Statement hearing to Tuesday, November 14th, at 2pm ET. Genesis has been directed by the Bankruptcy Court to docket an updated version of the Plan and Disclosure Statement by Monday, November 13th, at 12pm ET.

Details for listening to the November 14th hearing can be found here.

This week, Gemini filed an Objection to Genesis’s motion to approve the adequacy of the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan. As a reminder, last week, after months of postponements and adjournments, Genesis finally filed a proposed Amended Plan of reorganization.

Gemini’s Objection focuses on making sure that any Plan solicited for a vote by creditors does not dissipate Earn user assets and does not impair Gemini’s ability to fight for the over $1.6 billion in collateral that Gemini secured for the benefit of Earn users. Gemini also objects to the Amended Plan’s potential disenfranchisement of Earn users, who make up more than 99% of the Genesis claimant body by number. These are critical issues that should be resolved before the Amended Plan is solicited.

In addition to Gemini’s Objection, objections to the Disclosure Statement were also filed by the Ad Hoc Group of Genesis Lenders (AHG), the United States Trustee, and other parties in interest. And the Official Committee of Unsecured Creditors (UCC) filed a Reservation of Rights. In total, there are 16 objections.

A hearing on the adequacy of Genesis’s Disclosure Statement and the 16 objections filed in opposition will be held next week on November 7th at 2pm ET. Details for listening can be found here.

Today, Gemini filed an Adversary Proceeding against Genesis in Bankruptcy Court seeking to recover $1.6 billion in value for the benefit of Earn Users. For the past 12 months, Genesis has been trying to funnel this value away from Earn users to other creditors. With this value, every Earn User can be made whole. Through this Adversary Proceeding, Gemini is honoring its commitment as the Earn Users’ agent.

Summary

This fight started in the summer of 2022, when Gemini insisted Genesis secure all Earn Users’ loans to Genesis. Genesis eventually pledged to deliver to Gemini 62,086,586 shares of Grayscale Bitcoin Trust (GBTC) as collateral for those loans. Today, this collateral is worth nearly $1.6 billion dollars, which would completely secure and satisfy the claims of every single Earn User.

There is only one problem — Genesis. Genesis is the impediment to making the Earn Users whole. Genesis is seeking to take value away from Earn Users and funnel it to other creditor groups in two ways:

• First, Genesis refuses to recognize the validity of Gemini’s November 16, 2022 foreclosure on the first tranche of collateral (30,905,782 GBTC shares). Genesis’s sole purpose in doing so is to deprive Earn Users of the full benefit of more than $500 million in post-foreclosure appreciation. If Genesis can successfully challenge Gemini’s foreclosure, then, in essence, Earn Users will be forced to share the appreciation of hundreds of millions of dollars, even though Genesis transferred the collateral to Gemini for the Earn Users’ sole benefit, and Gemini foreclosed on the collateral to protect the Earn Users’ interests. Gemini holds this first tranche of collateral on behalf of the Earn Users and is ready to distribute the total value of the collateral (currently nearly $800 million dollars) to Earn Users. The only thing standing in the way is Genesis.
  

• Second, Genesis currently contemplates distributing the value of a second tranche of collateral (an additional 31,180,804 GBTC shares, worth more than $800 million dollars today) – to all of Genesis’s general unsecured creditors. That second tranche of collateral belongs to Earn Users. The November 10, 2022 amendment to the security agreement provided for the immediate transfer of the second tranche from DCG to Genesis and then from Genesis to Gemini – all for the sole benefit of Earn Users. Six days after promising to send the second tranche of collateral to Gemini, Genesis halted Earn User withdrawals – freezing more than $1 billion in Earn Users’ digital assets at Genesis. Genesis then refused to fulfill its contractual obligation to deliver the second tranche of collateral to Gemini for the benefit of Earn Users. Instead, Genesis glommed onto the Earn Users’ property and is now seeking to funnel value away from Earn Users to the other creditors with whom Genesis has been negotiating a plan of reorganization.

This is an unconscionable outcome. And Gemini will not accept it for the Earn Users. Gemini has tried for many months to resolve this dispute with Genesis, but Genesis has remained unreasonable, steadfastly refusing to treat Earn Users fairly. As a result, Gemini was left with no choice but to commence the Adversary Proceeding. It is time to resolve these issues so that Gemini may distribute the proceeds of the collateral to Earn Users and return the more than $1 billion in digital assets that Genesis has been withholding from Earn Users.

Background

Amidst the broad market turmoil in the summer of 2022, Gemini worked tirelessly to evaluate Genesis’s financial condition in order to manage risk related to the Gemini Earn Program. Gemini did this by entering into a security agreement (Security Agreement) (and subsequent amendments) pursuant to which Genesis promised to deliver to Gemini 62,086,586 shares of Grayscale Bitcoin Trust (GBTC) in two tranches (the Collateral) to secure all of the loans made by Earn Users to Genesis through the Gemini Earn Program. Today, this Collateral is worth more than $1.6 billion dollars, an amount that would completely secure and satisfy the claims of every Earn User. This point cannot be overstated. Gemini took appropriate steps to protect Earn Users and the loans that Earn Users made to Genesis. Moreover, Gemini secured collateral and the pledge of additional collateral in spite of Gemini and its management team being systematically lied to for months about the true health and financial condition of Genesis by Genesis, its former CEO Soichiro Moro, its parent company Digital Currency Group, Inc. (DCG), and DCG’s CEO Barry Silbert. Not only did these parties conspire to make false statements and misrepresentations to Gemini to mislead Gemini into believing that DCG had absorbed massive losses that Genesis incurred from the Three Arrows Capital Ltd. collapse, they also knowingly and intentionally furnished Gemini with falsified balance sheets and other financial reports to pretend that Genesis was solvent when in reality it was not even close to solvent; it was titanically insolvent. Against these odds and in the face of a massive fraud, Gemini managed to secure and collateralize all of the Earn Users’ previously unsecured loans. Gemini’s efforts have put Earn Users in a position to be made whole. There is only one problem — Genesis.

The only thing standing between Earn Users and the Collateral that can make Earn Users whole and is rightfully theirs, is Genesis. But Genesis has been actively working with other creditors and creditor groups for the past 10 months to take this Collateral away from Earn Users and redistribute it to the other creditors. Genesis has deprived Earn Users of the benefit of the Collateral through a series of pre- and post-petition decisions that are discussed below.

Collateral

Prior to the suspension of the Gemini Earn Program and Genesis’s subsequent collapse, Gemini insisted that Genesis post, in two stages, the Collateral to secure Earn Users’ loans to Genesis. Genesis agreed, as did its parent, DCG. Genesis’s agreement to pledge the Collateral to Gemini for the benefit of Earn Users through two transactions should have over- collateralized Earn Users’ previously unsecured loans.

Initial Collateral

On August 15, 2022, pursuant to the terms of the Security Agreement, Genesis pledged 30,905,782 shares of GBTC as collateral for Earn Users’ loans (the Initial Collateral). On November 16, 2022, following Genesis’s default under the terms of certain master loan agreements (the MLAs) of the Gemini Earn Program, and pursuant to the terms of the Security Agreement and in accordance with the requirements of the Uniform Commercial Code, Gemini foreclosed on the Initial Collateral. Gemini is currently holding $284.3 million in proceeds from that foreclosure for the benefit of Earn Users (the Foreclosure Value). However, Genesis has consistently asserted in filings and in discussions with counsel that Genesis disputes that Gemini’s foreclosure “satisfied applicable law.” Despite recognizing that the treatment of the Collateral is a significant issue, Genesis has taken no steps to address this dispute with the Court. As a result, Gemini has been prevented from distributing the proceeds of the Initial Collateral to Earn Users.

Now, Genesis wants to use the current value of the Initial Collateral — more than $800 million — instead of the Foreclosure Value to determine the Earn Users’ deficiency claim. The net effect will be tantamount to Genesis taking more than $500 million dollars in value away from Earn Users and requiring them to share the appreciation with Genesis’s other creditors. But it was Gemini who bore the market risk related to the Initial Collateral for the benefit of Earn Users following the foreclosure; so it follows that only Earn Users are entitled to any gain resulting from Gemini taking on that risk. It is a fundamental economic principle that there is no reward without risk. You cannot separate the two. Yet that is exactly what Genesis is trying to do: take the reward from Earn Users and give it to other creditors who took no risk. This is unfair and inequitable treatment of Earn Users. Had the value of the Initial Collateral decreased since November 16, 2022, Genesis surely would not be offering Earn Users any additional value to make up for the loss. As a matter of law and equity, the appropriate set off amount was established by Gemini’s foreclosure on November 16, 2022.

Additional Collateral

On November 10, 2022, at Gemini’s insistence, in an amendment to the Security Agreement, Genesis pledged an additional 31,180,804 shares of GBTC (the Additional Collateral) to Gemini for the benefit of Earn Users. This amended agreement was signed by Mark Murphy on behalf of DCG, and Derar Islam on behalf of GGC on November 10, 2022. Pursuant to the amended Security Agreement, Genesis’s parent, DCG, was to transfer the Additional Collateral to Genesis for the sole purpose of immediate onward distribution to Gemini for the benefit of Earn Users. However, although Genesis concedes that DCG transferred the Additional Collateral to Genesis for the benefit of Earn Users, Genesis refused to then transfer the Additional Collateral to Gemini. Inexplicably, despite “absolute[ly] and unconditional[ly]” pledging the Additional Collateral to Gemini, and therefore holding no equitable interest in the Additional Collateral, Genesis’s proposed plan of reorganization provides for the distribution of the liquidated value of the Additional Collateral to Genesis’s other general unsecured creditors. Genesis again proposes to sacrifice the interest of Earn Users for the benefit of Genesis’s other creditors.

Conclusion

Today’s Adversary Proceeding asks the Bankruptcy Court to confirm that Gemini’s foreclosure on the Initial Collateral was proper and recognize the Earn Users’ rights to the Additional Collateral that would make Earn Users whole. The Adversary Proceeding also seeks to stop Genesis’s proposed plan of reorganization, which contemplates transferring value away from Earn Users’ to other Genesis creditors. Genesis recently stated that “nobody’s trying to take value from the Earn Users.” This couldn't be further from the truth, and needs to stop. Gemini will continue to fight for Earn Users rights and the value that is rightfully theirs.

Where do we go from here?

The pathway to a full recovery for the Gemini Earn Users is straightforward:

1. Earn Users should receive the full benefit of the first tranche (Initial Collateral) and Gemini’s protective foreclosure on it in November 2022. This will correspondingly mean that Earn Users’ recovery from Genesis is not diminished by other creditors capturing post-foreclosure appreciation – appreciation to which only the Earn Users are entitled.

2. The second tranche (Additional Collateral) should be delivered immediately to Gemini for the benefit of the Earn Users. This will give the Earn Users the benefit of the second tranche that Genesis pledged to them nearly a year ago. It will also assure that the value of the second tranche is not dissipated by Genesis and funneled to other creditors. 

3. Gemini should be permitted to immediately begin monetizing the first tranche (and to monetize the second tranche once delivered) for the purpose of purchasing the digital assets owed to Earn Users so that those assets can be returned to Earn Users.

We of course expect opposition from Genesis and potentially other creditors – in their own right or through the official committee of unsecured creditors (UCC). But Gemini will continue to fight for Earn Users and what is right. We will keep you updated as it unfolds. 

Other Updates

Earlier this week, during the hearing on October 24th, Judge Lane granted Genesis a two-week extension of its exclusive period to file and solicit a plan of reorganization, through November 7, 2023, over the objections of the Fair Deal Group (FDG) – which includes Gemini – and the Ad Hoc Group of Genesis Lenders (AHG). Following the hearing, Genesis filed an amended proposed plan of reorganization and an amended disclosure statement with respect to the amended proposed plan. Judge Lane will consider Genesis’s amended disclosure statement during a hearing scheduled for November 7, 2023. Gemini intends to object to Genesis’s motion to approve the disclosure statement.

This week, Genesis adjourned the hearing on the adequacy of information in the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan for a 10th time. The hearing is now scheduled for November 7th.

Also this week, the Ad Hoc Group of Genesis Lenders (AHG) filed an objection to Genesis’s third motion to extend its exclusivity period and requested termination of Genesis’s exclusivity. The Fair Deal Group (FDG) – which includes Gemini – also filed an objection to Genesis’s exclusivity extension motion. A hearing on the motion and the AHG’s and FDG’s objections will be held next week on October 24th at 11am ET. Details for listening in can be found here.

Lastly, the New York Attorney General sued Genesis, its former CEO, its parent company Digital Currency Group, Inc. (DCG), and DCG’s CEO Barry Silbert personally for conspiring to lie and defraud Gemini, Earn users, and other Genesis creditors. The Attorney General’s lawsuit confirms what we’ve been saying all along — that Gemini, Earn users, and other creditors were the victims of a massive fraud and systematically “lied to” by these parties about “Genesis’s financial condition.” With that said, Gemini wholly disagrees with the Attorney General’s decision to also sue Gemini. Blaming a victim for being defrauded and lied to makes no sense and we look forward to defending ourselves against this inconsistent position.

Work continued this week with the Ad Hoc Group (AHG) and the Fair Deal Group (FDG) to improve the sufficiency of the Digital Currency Group, Inc. (DCG) contribution. This work will continue until October 24th, which is when Genesis’s exclusivity period expires. Genesis has stated they intend to file a plan on or before this date.

This week, Gemini continued to work with the Ad Hoc Group (AHG) and the Fair Deal Group (FDG) to improve the sufficiency of the Digital Currency Group, Inc. (DCG) contribution, which  is unacceptable as contemplated in Genesis’s “agreement in principle” with DCG (see September 29th and September 1st updates, below). Creditors remain aligned that DCG must put terms on the table that confer substantially greater recoveries to Genesis creditors if DCG wants to reach a deal. 

To that end, the creditors groups have developed a plan that addresses all key creditor issues and defines a DCG contribution that is acceptable to achieve sufficient creditor support. We anticipate that this plan will be presented to DCG early next week, at which point they will have two choices: (1) decide whether they are going to make peace with creditors and accept the plan with an increased DCG contribution or (2) force creditors to commence litigation against DCG in order to force them to do the right thing and compensate creditors for the damage they have caused. 

In either case, Genesis has indicated that it intends to file an amended plan on or before October 24th, which should take the form of either: (a) a plan that includes an improved contribution from DCG or (b) a plan that does not include a contribution from DCG but provides for the distribution of existing assets in the Genesis estate while concurrently allowing creditors to pursue litigation against DCG to recover any additional assets owed and not distributed from the estate.

Further to this point, Genesis filed a motion seeking a third extension of its exclusivity period. As a reminder, following a lengthy hearing on September 6th and over the objections of Gemini, the AHG, and the FDG (see September 8th update, below), Judge Lane granted Genesis a 30-day extension of its exclusive period to file and solicit a plan to October 6th. Gemini is disappointed that this October 6th target was not met. Every extension means yet another delay for Earn users who have been without their assets for 11 months. Gemini has continued to voice its frustration at how long this process is taking. Next week must be the end of DCG’s games and Genesis’ tolerance of them. Either DCG steps up and does what’s right, or Genesis needs to move quickly towards filing an amended plan by no later than October 24th that paves the way for litigation against DCG. Enough is enough.

Lastly, Judge Lane issued a decision on October 6th, granting Genesis’s motion for approval of its agreement to allow FTX a $175 million claim in the Genesis bankruptcy.

This week we responded to a recklessly published and completely misleading story from the New York Post about the liquidity reserve Gemini established for the benefit of Earn users. As we explained, the Gemini Earn Program Terms permitted Gemini to establish a “liquidity reserve” for the benefit of Earn users using assets deposited into the Earn program. Amidst the broad market turmoil in the summer of 2022, Gemini decided to pull back $282 million of Earn users’ assets from Genesis on August 9, 2022, and move those assets in the liquidity reserve for Earn users’ benefit.

More than $245 million of the liquidity reserve was used to fulfill Earn users’ redemption requests. None of these funds went to Gemini, its Founders Cameron and Tyler Winklevoss, or their investment firm Winklevoss Capital. When Genesis commenced its bankruptcy case, the Gemini Earn Program’s remaining liquidity reserve had an aggregate value of approximately $36 million. Gemini holds this remaining liquidity reserve for the benefit of Earn users, to be distributed equitably to Earn users concurrently with distributions from the Genesis bankruptcy.

While Digital Currency Group, Inc. (DCG), Genesis’s parent company, and Barry Silbert (CEO of DCG) were busy carrying out their latest misinformation campaign, the Ad Hoc Group (AHG), the Fair Deal Group (FDG), and Gemini continued to work to improve the sufficiency of the DCG contribution contemplated in Genesis’s “agreement in principle” with DCG. By way of background, last month, Genesis purported to have reached an “agreement in principle” with DCG and the Unsecured Creditors Committee (UCC) regarding DCG’s contribution to the Genesis estate (see September 1st update, below). In reality, this “agreement in principle” is a dead-end, and it has been widely criticized for its insufficiency. Creditors are now aligned that DCG must put terms on the table that confer substantially greater recoveries to Genesis creditors if they want to reach a deal. 

DCG is running out of time to accept such revised terms. Genesis’s plan exclusivity expires on October 6th (see September 22nd and September 8th updates, below). Genesis has indicated that it intends to file a plan on October 6th (see September 22nd update, below), which should take the form of either (1) a plan that includes an improved contribution from DCG or (2) a plan that does not include a contribution from DCG but provides for the distribution of existing assets in the Genesis estate while concurrently allowing creditors to pursue litigation against DCG to recover any additional assets owed and not distributed from the estate. The ball is now in DCG’s court as to whether they want to step up and do the right thing on their own accord or be forced to do the right thing by a court of law through litigation.

On Monday, Bankruptcy Judge Lane held an evidentiary hearing on Genesis’s motion for approval of its agreement to allow FTX a $175 million claim in the Genesis bankruptcy. A written decision or bench ruling announcing his decision is expected soon.   

Genesis adjourned the hearing on the adequacy of information in the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan for an 8th time. The hearing is now scheduled for October 6th. This is the date when Genesis’s exclusivity period ends, so it is an important forcing function to bring this process to a conclusion, which should take the form of either (1) a plan that includes an improved contribution from Digital Currency Group, Inc. (DCG) or (2) a plan that does not include a contribution from DCG but provides for the distribution of existing assets in the Genesis estate while concurrently allowing creditors to pursue litigation against DCG to recover any additional assets owed and not distributed from the estate.

Genesis’s adversary proceedings against its parent company DCG and DCG International Investments Ltd. (DCGI) also continues to remain stayed or on hold (see September 8th update, below).

Next week, a hearing on Three Arrows Capital’s foreign representatives’ motion to modify the automatic stay to permit it to litigate its claims in its separate insolvency proceedings will be held on September 26th at 2pm ET.  Details for listening in are here.

This week, Gemini amended its fraud complaint against Digital Currency Group, Inc. (DCG), and Barry Silbert and filed a Response to a contrived, misleading, and inaccurate statement issued by DCG earlier in the week. The key takeaway: DCG is gaslighting creditors and testing Earn users’ resolve by baiting them with false promises of high recoveries. Make no mistake: under the current “agreement in principle” that DCG is promoting, Earn users will not actually receive anything close in real value terms to the DCG-stated recovery rates. As we wrote in our Response, Earn users should not take the bait. Gemini continues its efforts to achieve a maximum recovery for Earn users, and Gemini will not stop until DCG has contributed all that it should and can.

Next week, the evidentiary hearing on approval of Genesis’s agreement to allow FTX a $175 million claim will be held on September 18th at 10am ET. Details for listening in are here.

Important: Please be aware that Gemini, Genesis, and Kroll *will never text you* regarding the Genesis bankruptcy. Gemini’s primary support channel is email. Gemini will only call customers in special cases upon request and after coordinating a date and time via email correspondence. Any distribution of Genesis assets will only be at the time and in the manner established by the Bankruptcy Court. Information about the Bankruptcy Court’s orders can be found at the official case website hosted by the Claims Agent, Kroll Restructuring Administration LLC here. We will also continue to post material updates regarding Earn on this page.

It was another busy week in the Genesis bankruptcy. Following a lengthy hearing on Genesis’s exclusivity motion on September 6th, Judge Lane granted Genesis a 30-day extension of its exclusive period to file and solicit a plan of reorganization, over the objections of Gemini, the Ad Hoc Group of Creditors (AHG), and the Fair Deal Group (FDG). This is an improvement over the 60-day extension that Genesis requested, and the hearing was a good opportunity for Judge Lane to hear Genesis’s creditors’ dissatisfaction with the DCG “agreement in principle” announced last week. Judge Lane also stressed the need for urgency and that time is not on anyone’s side.

In addition, it was universally recognized among the parties that the current deal lacks creditor support: counsel for the Unsecured Creditor Committee (UCC) stated that the deal would need to be improved and counsel for Genesis described the deal as “imperfect” and that they did want not try to “cram down” a deal.

Minutes before the hearing, Genesis finally commenced adversary turnover proceedings against its parent company Digital Currency Group Inc. (DCG) and DCG International Investments Ltd. (DCGI), which can be reviewed here and here respectively, seeking payment of the more than $600 million of loans that DCG and DCGI have owed to Genesis (and its creditors) since May 2023. Shortly after filing these complaints, Genesis announced that it would stay its pursuit of them while it negotiates its dead-end “agreement in principle” with DCG. The fact that Genesis would immediately stay these lawsuits — which are a complete slam dunk — further confirms our belief that Genesis is going easy on DCG.

By way of background, Gemini has spent the last two months demanding that this turnover proceeding be commenced, including in its open letter on July 3, 2023 (see July 7th Earn update, below). We have also written letters in early July to both the Genesis Special Committee and the UCC, asking that they exercise their fiduciary responsibilities and begin these proceedings. Instead, Genesis wasted that time pursuing the “deal in principle” that does not have the support of its creditors.  

 Lastly, the hearing on approval of Genesis’s agreement to allow FTX a $175 million claim was deferred to September 18th at 10am ET to allow the AHG, Gemini, and the FDG to take discovery. Details for attending the hearing will be posted to this page once they are made available.

Today’s hearing on Genesis’s exclusivity motion will be held before Judge Lane at 2pm ET. Genesis will also provide a status update on their motion for approval of their settlement with FTX. The full agenda can be found here. You can listen to the hearing using the following dial-in information:

Dial-in: 1-929-205-6099

Access Code: 92353761344#

(Listen-only)

It has been a busy week in the Genesis bankruptcy. The summary: Genesis purports to have reached a “deal in principle” with its parent, Digital Currency Group, Inc. (DCG), and the Unsecured Creditors Committee (UCC), subject to definitive documentation, including continued negotiation over the terms and conditions of an amended chapter 11 plan.

But the “deal” that Genesis has been negotiating for more than seven months has virtually no support among Genesis’s creditors, and there is absolutely no evidence that this “deal” would lead to the 70-90% recoveries to Earn users touted by Genesis, or anywhere close to that.

The scant details about the deal in principle shared by Genesis in its public announcement confirms Gemini’s belief that Genesis would go easy on DCG and Barry Silbert, to the direct detriment of Genesis’ creditors, including Earn users. DCG’s contribution under the deal in principle amounts to significantly less than what DCG currently owes and also fails to capture any consideration in exchange for releasing DCG and Barry Silbert from valuable claims resulting from DCG’s role in harming Genesis’s creditors, outlined in the lawsuit we filed against DCG and Barry Silbert personally in New York court on July 7th (see July 7th Earn update, below). Any plan incorporating the deal in principle would merely be a dead end.

The time for Genesis to be leading the process has come to an end. Gemini and other creditors have formed a new group – the Fair Deal Group (FDG) – that is dedicated to bringing immediate value to Genesis’s creditors and pushing for higher and better recoveries to creditors to compensate for DCG’s role in Genesis’s default to them. 

To that end, Gemini, the FDG, and the Ad Hoc Group of Creditors (AHG) have all asked the Bankruptcy Court to terminate Genesis’s exclusive right to file and solicit a plan so that Genesis’s legitimate creditors can move forward expeditiously with a plan that has their support. Gemini, the FDG, and the AHG have also all asked the Bankruptcy Court to deny approval of Genesis’s settlement with the FTX estate, which would give FTX a $175 million claim in the Genesis estate, and effectively buy votes for Genesis’s sweetheart “deal” with DCG.

We encourage you to read more about each of these filings. Here is the summary of what happened this week and what is expected next week, along with links to the filings: 

• August 29: Genesis terminated the Bankruptcy Court ordered mediation and announced a deal in principle with its parent, DCG, and the UCC. The AHG responded by issuing a statement confirming its lack of support for the deal in principle and reiterating many of the themes of DCG’s wrongdoing and fraud that Gemini asserted in its Complaint nearly two months ago. 

• August 30: Gemini opposed Genesis’s bid to extend its exclusive period to file and solicit a plan of reorganization for an additional 60 days. The AHG and FDG also opposed the extension.

• August 31: The AHG opposed Genesis’s proposed settlement with FTX, and Gemini and the FDG both submitted joinders in support of the AHG’s opposition.

• September 1: The UCC responded to criticisms of the deal in principle, acknowledging that the “deal” is imperfect. Genesis responded to the objections to its exclusivity motion.

• September 6 at 2pm ET: Genesis’s exclusivity motion and its motion for approval of the FTX settlement will both be heard before Judge Lane on September 6th at 2pm ET. Details for listening in are here.

Genesis adjourned the hearing on the adequacy of information in the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan for a 7th time. The hearing is now scheduled for September 26th. We expect Genesis will also file a notice to extend the mediation period in the coming days, which would be the 10th extension. Gemini remains disappointed in how long it has taken to negotiate a Digital Currency Group, Inc. (“DCG”) contribution that delivers appropriate value to Genesis’s creditors, including Earn users. Gemini is considering alternative paths to allow Earn users to immediately recover more of the funds they are owed, including objecting to Genesis’s motion seeking a 2nd extension of its period of exclusivity to propose a plan of reorganization (see August 4th update, below).

This week, Kroll, Genesis’s claims agent, advised Genesis creditors that there was a third-party security incident at Kroll that may have impacted some of the personal data submitted by claimants in connection with the claims process in Genesis’s chapter 11 case. Gemini did not submit any Earn users’ personal data when filing the Master Claim, and Kroll should not have been in possession of Earn user personal data at the time of the breach. However, any Earn user that filed its own proof of claim against Genesis may have been impacted by this security breach at Kroll. For information regarding the third-party security incident, as well as steps you can take to help protect yourself against misuse of your personal data, please refer to Kroll’s Notice of Communication to Claimants. For more information on the Master Claim, see the May 26th Earn update, below.

Two mediation sessions were held on August 16th and 17th this week. Genesis filed notices to continue the mediation first until August 17th and then until August 23rd. Gemini is disappointed in how long it has taken to negotiate a Digital Currency Group, Inc. (“DCG”) contribution that delivers appropriate value to Genesis’s creditors, including Earn users. DCG continues to remain in default after missing its obligations to pay the Genesis bankruptcy estate $630 million that was due on May 9 – 11th.

As we shared last week, DCG, and its CEO Barry Silbert filed a motion to dismiss the lawsuit we filed against them for not only architecting and masterminding the DCG and Genesis fraud against creditors, including Earn users, but also directly and personally perpetrating it (see July 11th and July 7th updates, below). We look forward to responding to the ridiculous arguments raised in their motion. Our response will be filed on or before September 14th, pursuant to an agreed schedule entered by the District Court.. We remain committed to pushing DCG to pay what it already owes to Genesis and to compensate Earn users for the consequences of DCG’s wrongdoing — whether through mediation or litigation.

Lastly, Genesis filed a motion seeking entry of an order approving the settlement agreement between Genesis and the FTX estate. The settlement resolves FTX’s $3.7 billion preference claim against Genesis (see July 28th and July 7th updates, below). Pursuant to the settlement agreement, the FTX debtors would receive an allowed $175 million general unsecured claim against Genesis. This is a substantial step forward in the Genesis restructuring and a significant reduction of FTX’s $3.7 billion claim on the Genesis estate. The smaller FTX claim ensures better recoveries for all creditors, including Earn users.

As a reminder, the mediation ends next Wednesday on August 16th and Genesis has stated that it will not seek any further extensions. If a deal cannot be reached with DCG before August 16th, Genesis will proceed with a further amended version of the Amended Plan currently on file. Such a plan will provide for the distribution of existing assets in the Genesis estate while concurrently allowing creditors to pursue litigation against DCG to recover any additional assets owed and not distributed from the estate.

Genesis adjourned the hearing on the adequacy of information in the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan for a 6th time. The hearing is now scheduled for September 6th. Genesis’s motion seeking a second extension of its period of exclusivity to propose a plan of reorganization is also scheduled for hearing on September 6th (see August 4th update, below).

On August 10th, Digital Currency Group, Inc. (DCG), the parent company of Genesis, and its CEO Barry Silbert, filed a motion to dismiss the lawsuit we filed against them for not only architecting and masterminding the DCG and Genesis fraud against creditors, including Earn users, but also directly and personally perpetrating it (see July 7th update, below). The arguments in their motion are ridiculous and we share some more thoughts in this tweet thread.

Following a status conference on August 2nd, Judge Lane approved a 7th extension of the mediation period, to August 16th, over Gemini’s objection. Gemini continues to advocate for disclosure of the final offers made in the mediation to allow all creditors to evaluate the proposals. And while Genesis’s counsel stated at the status conference that Genesis, Digital Currency Group, Inc. (DCG), the Unsecured Creditors Committee’s (UCC), and the Ad Hoc Group of Creditors (AHG) remain very close to a deal in principle, this is the same thing Genesis’s counsel said at the last mediation status conference on July 13th. 

With that said, Genesis’s counsel indicated that Genesis will not seek any further extensions of the mediation period. If a deal cannot be reached with DCG before August 16th, Genesis will proceed with a further amended version of the Amended Plan currently on file. Such a plan will provide for the distribution of existing assets in the Genesis estate while concurrently allowing creditors to pursue litigation against DCG to recover any additional assets owed and not distributed from the estate. 

Genesis adjourned the hearing on the adequacy of information in the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan for a 5th time. The hearing is now scheduled for August 18th.

Lastly, Genesis also filed a motion with the Bankruptcy Court seeking a 2nd extension of its period of exclusivity to propose a plan of reorganization. Objections to the motion are due by August 30th and the matter is scheduled for hearing on September 6th. Gemini is currently considering whether to support or object to the motion.

Genesis is seeking a 7th extension to the mediation period, this time until August 10th. This aligns with the hearing on the adequacy of information in the Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan, which has now been adjourned for a 4th time and is now scheduled for August 11th. Gemini remains frustrated with Genesis, the Unsecured Creditors Committee (UCC), and the Ad Hoc Group (AHG) for being unable to advance or disclose the purported deal that was “close” two weeks ago. Gemini continues to believe that creditors, and the confirmability of whatever plan might come out of mediation, would be best served by immediately understanding the current proposals.

On a positive note, Genesis and the FTX estate submitted a letter to Judge Lane advising the Court that Genesis and FTX have reached an agreement in principle regarding the crossing claims that FTX and Genesis have asserted against one another. This resolution in principle marks a substantial step forward in the Genesis restructuring and signals an agreeable reduction of FTX’s $3.7 billion claim on the Genesis estate. The smaller the FTX claim, the better recoveries for all creditors, including Earn users.

Gemini will continue to push for Genesis, the UCC, and the AHG to disclose the supposed deal that they have been keeping secret so that all creditors can evaluate it in the lead up to the hearing on August 11th.

For a third time, Genesis adjourned the hearing on the adequacy of information in its Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan. The hearing is now scheduled for August 4th. Gemini remains concerned with the possibility that a potential deal between Genesis and Digital Currency Group, Inc. (DCG) will be announced on the eve of the Disclosure Statement hearing without sufficient time for creditors, including Earn users, to evaluate it (see July 14th update, below). The Debtors’ continuous extensions and postponements and lack of visibility has significantly delayed the return of Earn users’ assets to them for over eight months. Genesis and DCG owe Earn users more: more expediency and more consideration. 

This week, there were also two important developments regarding the FTX Group’s and Three Arrows Capital’s claims against Genesis.

1. On July 20th, Judge Lane again declined to rule on a pair of motions from Genesis and the FTX estate addressing FTX’s $3.7 billion preference claim against Genesis while the parties continue to exchange information and meet and confer on discovery and outstanding open issues (see July 7th update, below). Judge Lane instead directed Genesis and the FTX Group each to submit letter briefs to the court by July 27th outlining open issues and a proposed schedule for estimation, which will be considered during a status conference on August 2nd or August 4th.
   
   

2. Genesis filed its First Omnibus Objection seeking to disallow and expunge Three Arrows Capital’s three proofs of claim totaling more than $1 billion. Judge Lane will consider the objection to Three Arrows Capital’s claims at a hearing on August 24th.

Following an emergency status conference on July 13th, Judge Lane approved a sixth extension of the mediation period, this time to July 27th. Genesis, the Unsecured Creditors Committee (UCC), and the Ad Hoc Group (AHG) all favored extending the mediation period to avoid disclosing, as required by the Mediation Order, the final offers made prior to the mediation’s expiration on July 10th. Gemini, however, opposed the extension and instead advocated for a disclosure that would permit all creditors to evaluate the proposals. This sixth extension of the mediation keeps Earn users and Genesis’s other individual creditors in the dark as to the status of discussions. We believe strongly that creditors — and the confirmability of whatever plan might come out of mediation — would be best served by immediately understanding the current proposals without further delay. This is especially true in light of comments from counsel for Genesis and for the UCC that “we are very close to a deal in principle among some of the parties.” Creditors should have the ability to evaluate the terms of this deal and see how it compares to the Best and Final Offer that Gemini published on July 3rd. The Best and Final Offer is a deal that is fair for Earn users, and Gemini will oppose any deal that does not afford equivalent value to the Earn users.

For a second time, Genesis adjourned the hearing on the adequacy of information in its Disclosure Statement and on the solicitation and the voting procedures with respect to Genesis’s Amended Plan. The hearing is now scheduled for July 27th, which is the same day that the mediation period expires. Gemini remains concerned that a deal will be announced on the eve of the Disclosure Statement hearing without sufficient time for creditors, including Earn users, to evaluate the deal. This is concerning and we will continue to raise this with Judge Lane.

It was a big week. On July 3rd, we published an Open Letter to Barry Silbert — founder and CEO of Digital Currency Group, Inc. (DCG) — telling him that his delay tactics and games are over. We also published a Best and Final Offer that we believe is fair and reasonable for everyone. DCG and Silbert did not accept our offer by the July 6th, 4pm ET deadline. Accordingly, and as promised, we filed a lawsuit today against DCG and Barry Silbert personally in New York court for not only architecting and masterminding the DCG and Genesis fraud against creditors, including Earn users, but also directly and personally perpetrating it. Tellingly, Barry and DCG haven’t denied a single assertion in our 33-page complaint. 

On July 6th, Judge Lane declined to rule on a pair of motions from Genesis and the FTX estate addressing FTX’s $3.7 billion preference claim against Genesis. Instead, Judge Lane instructed the parties to continue conducting discovery and meet and confer over outstanding issues to attempt to reach resolution themselves (see June 16th and June 2nd Earn updates, below). The pair of motions have been continued to the July 20th hearing, at which time Judge Lane intends to rule on them, to the extent the parties cannot reach agreement among themselves. Judge Lane also indicated that, given Genesis’s desire to estimate the FTX Group’s claim against it prior to a plan confirmation hearing, early September may be more realistic than Genesis’s currently scheduled confirmation hearing date of August 24th.

On June 29, 2023, Genesis filed a motion for approval of, among other things, the adequacy of information in its Disclosure Statement and the solicitation and the voting procedures with respect to Genesis’s Amended Plan. The motion is set for hearing on July 20th. Genesis has adjourned this hearing to occur one week later than its initially announced schedule to plan confirmation (see June 9th Earn update, below). Genesis’s solicitation and voting procedures provide a clear process for each Earn user to submit a vote on Genesis’s final amended proposed plan. The current plan does not contain sufficient provisions for the benefit of Earn users and Gemini remains dedicated to working with Genesis to propose an Amended Plan that Earn users can vote to support.

The mediation period has been extended again, this time to July 5. The purpose of the mediation is to determine the contribution to be made by Digital Currency Group, Inc. (DCG). A higher contribution from DCG will necessarily lead to a better outcome for Earn users. Gemini is disappointed in how long it has taken to negotiate a DCG contribution and we are committed to pushing DCG to pay what it already owes to Genesis and to compensate the Earn lenders for the role that DCG had in Genesis’s failure to return Earn assets to the Earn users. DCG owes Genesis over $630 million that came due in early May. DCG is in default. Should the mediation fail, Gemini supports Genesis taking steps to immediately recover these funds from DCG.

Gemini is frustrated that Earn users have been separated from over $1.122 billion in assets loaned to Genesis for over seven months. Genesis and DCG owe Earn users more than these continuous deadline extensions.

Here are this week’s updates:

1. On June 22, 2023, Genesis filed a motion to establish procedures for claims objections, notices, and hearings. The motion is set for hearing on July 6th. Gemini continues to cooperate with Genesis in connection with Genesis’s review of claims filed by Earn users that are duplicative of the Master Claim. As a reminder, Genesis’s reconciliation and allowance or disallowance of all claims is a necessary step to bringing recoveries to creditors.

2. Gemini continues to work with Genesis, the Unsecured Creditors Committee (UCC), and the Ad Hoc Group of Creditors (AHG) to advance an Amended Plan to be filed before the July 12th hearing when it will be heard. Mediation discussions continue between the parties under the further extended mediation order that expires on June 30th.

There are three important updates for Earn users this week:

1. On Tuesday, we wrote about the proposed Plan that Genesis filed in an effort to keep its confirmation schedule (see below). On Friday, Genesis, with the consent of Gemini, the Unsecured Creditors Committee (UCC), the Ad Hoc Group of Creditors (AHG), and Digital Currency Group, Inc. (DCG), filed a notice extending the mediation period by another week to June 23, 2023. The mediation extension permits productive discussions to continue regarding DCG’s contribution to the Genesis bankruptcy. In parallel Gemini is working with Genesis and the other parties on proposed Plan provisions to best position Earn users to recover assets from Genesis.
   

2. At a June 15, 2023 hearing, Judge Lane heard from Genesis and FTX Group on a pair of motions addressing the FTX Group’s $3.7 billion preference claim against Genesis. Judge Lane directed the parties to meet and confer on a process and develop a better factual record to identify relevant issues. A further hearing is scheduled for July 6, 2023. Gemini fully supports the Genesis estimation motion regarding the FTX and Alameda claims and views estimation of the FTX and Alameda claims as a critical and essential step to ensuring that Genesis returns assets to Earn users as promptly as possible.
   

3. Gemini is cooperating with Genesis in connection with Genesis’s review of claims filed by Earn users. Genesis’s reconciliation and allowance or disallowance of all claims is a necessary step to bringing recoveries to creditors.

Today, Genesis filed an amended proposed Plan and Disclosure Statement. Genesis’s filing of a Plan is another step towards the conclusion of the Genesis bankruptcy and maintains Genesis’s schedule towards confirmation and distribution by the end of the summer. Gemini is still working with Genesis on terms related to Earn users, including provisions related to the treatment of Earn users claims and the process of making distributions to Earn users. As a result, Gemini is not a part of today’s Plan or ready to support its terms, however, we continue to work with Genesis, the Unsecured Creditors Committee (UCC), and the Ad Hoc Group of Creditors (AHG) to advance an Amended Plan to be filed at a later date and heard at the July 12th hearing.

There are three important updates for Earn users this week:

1. June 5th Omnibus Hearing
   
   During the June 5th Omnibus Hearing, Judge Lane granted Genesis’s request for a 75-day extension to its period of exclusivity to propose an amended Plan of Reorganization (Plan). This extension includes a provision for the Unsecured Creditors Committee’s (UCC), the Ad Hoc Group of Creditors (AHG), or Gemini to terminate in the event that Genesis stops cooperating on the further development or advancement of a Plan. 
   
   During the hearing, our counsel expressed confidence in the plan process and our determination to make real and immediate progress to bring this case to a resolution and expedite distributions to Earn users and other creditors as quickly as possible. Without real progress in the coming weeks, Gemini stands ready to exercise its available rights to advance alternative methods to distribute collateral to Earn users as promptly as possible and to undertake efforts to identify additional assets that may be made available for distribution to Earn users to minimize the ongoing harm to Earn users caused by the delays in the current proceeding. 
   
   Judge Lane also approved Genesis’s request to extend the mediation period (originally scheduled to end on May 31st) to June 16th and denied requests by FTX / Alameda and Three Arrows Capital to participate in the mediation. The mediation remains focused on the contribution to be provided by Digital Currency Group, Inc. (DCG) to the Genesis bankruptcy. As a reminder, DCG remains in default after missing its obligations to pay the Genesis bankruptcy estate $630 million due on May 9th – 11th. 
   
   

2. Notice of Hearings
   
   On June 7th, Genesis filed a notice stating its intention to file a Plan and Disclosure Statement. This is important because this notice starts the clock on approving a Plan, a necessary step towards permitting the distribution of assets to creditors. And this filing is a visible sign of Genesis’s commitment to bringing recoveries to creditors as soon as possible.
   
   To that end, this notice has resulted in the proposed scheduling of two key hearings: (1) a hearing on the adequacy of the information in the Disclosure Statement which is set for July 12th at 2pm ET and (2) a confirmation hearing on the Plan which is set for August 24th at 11am ET.
   
   Below is the working timeline of proposed milestones:
   
   June: Filing of Plan and Disclosure Statement
   July 5: Deadline to file objections to Disclosure Statement
   July 12: Hearing on the Disclosure Statement
   August 17: Deadline to file objections to the Plan
   August 24: Confirmation Hearing on the Plan
   
   While this schedule is subject to change, we are optimistic these dates can be met. For more details on the notice and a link to access it, see the June 7th Earn update, below. No immediate action by Earn users is necessary at this time.
   
   

3. Genesis’s Plan and Disclosure Statement
   
   Genesis has not yet filed a Plan and Disclosure Statement. Gemini continues to work alongside Genesis, the UCC, and the AHG, and the parties continue to make significant progress on substantive issues. We believe a consensual Plan with DCG’s participation can be submitted to the Bankruptcy Court in time to keep with Genesis’ current schedule of hearings and its timetable to making distributions, however, this hinges on whether or not DCG and Barry Silbert are willing to take immediate action to present an acceptable deal to Genesis and the creditors. Should a deal not be reached by June 16th, a non-consensual Plan will be advanced without DCG’s consensual participation that provides an avenue forward to distribute existing assets in the Genesis estate while concurrently litigating against DCG to recover assets for the benefit of Genesis creditors, including the Earn users.
   
   We remain committed to doing everything we can to ensure Genesis returns assets to Earn users as promptly as possible. Gemini continues to support Genesis in each of the approaches it tries to reach this goal and remains motivated to relieve Earn users’ frustrations with Genesis’s delayed return of more than $1.1 billion to over 232,000 Earn users.

The following message was shared with Earn users today:

Gemini is committed to returning as much value as possible and as quickly as possible to Earn users. We continued our efforts this week and we are optimistic that progress will continue to be made. We remain closely coordinated with other creditor groups, including the Unsecured Creditors Committee (UCC) and the Ad Hoc Group of Creditors (AHG). Judge Lane will hold an omnibus hearing regarding the Genesis bankruptcy on Monday June 5th at 11am ET. This is a public hearing, and you can find information about how to listen here.

Gemini, along with members of the UCC and the AHG, had a meaningful conference with Genesis and its “Special Committee” this week. We voiced our view that as much pressure as possible must be brought to bear on Digital Currency Group, Inc. (DCG) to bring it to the table. There can be no further delay. Gemini is confident that the Special Committee heard the concerns of the creditors and is likewise committed to the highest possible recovery for Genesis creditors as well as distributions as soon as possible. This aligns with Genesis’ previously-filed motion seeking to extend its period of exclusivity to propose a Plan of Reorganization. The UCC and the AHG both filed statements supportive of Genesis’s request, reserving later objection rights, and the UCC requested an expedited exclusivity termination provision. This matter will be heard at Monday’s hearing.

As a reminder, Gemini is currently working alongside Genesis, the UCC, and the AHG on a Plan of Reorganization to be submitted to the Bankruptcy Court in the near term that does not include DCG’s consensual participation. Unless Barry Silbert and DCG take immediate action to present an acceptable deal to Genesis and the creditors, we expect that the Plan of Reorganization will provide an avenue forward to distribute existing assets in the Genesis estate while concurrently litigating against DCG to recover assets for the benefit of Genesis creditors, including the Earn users. As an additional reminder, DCG is in default after missing its obligations to pay the Genesis bankruptcy estate $630 million that was due on May 9 – 11th. DCG will have the opportunity to make good on its financial commitments to Genesis even after the Plan of Reorganization is filed, but it will be on a timetable acceptable to creditors. DCG’s delay tactics will no longer work.

Genesis’s request to extend the mediation period to June 16th will also be addressed at Monday’s hearing. We have seen the statements submitted by Earn users opposing this extension as yet another delay in the process. Our expectation is that the extended mediation period will not cause delay: we are pushing for the Plan of Reorganization to be filed as soon as possible regardless of any mediation extension. And our lawyers at that hearing will echo your frustration with the lack of visible progress. Enough is enough already. 

A visible sign of Genesis’s commitment to bringing higher recoveries to Earn users in a shortened time frame is the “estimation motion” it filed early Friday morning regarding the FTX / Alameda claims. A $3.8 billion claim in favor of the FTX / Alameda debtors into the Genesis bankruptcy would be devastating to Genesis creditor recoveries. The estimation proceeding, which Gemini supports, will bring prompt clarity to the magnitude of the FTX / Alameda claims and is a critical step in allowing Genesis to make distributions to its creditors. The FTX debtors are also seeking a seat at the table in the Genesis matter: on Friday, FTX opposed the mediation extension on the basis that the mediation should be extended only if FTX is included as a mediating party. 

Genesis owes over $1.1 billion to over 232,000 Earn users. And it has owed that since November 16, 2022. That is a lot of money, and it is a lot of people, people who have borne the burden of DCG and Barry Silbert’s delay tactics for too long. Gemini is committed to each and every Earn user. We understand your frustration; we share your frustration; and we are motivated to relieve that frustration.

Here is what happened with Earn this week:

SEC Complaint. Today, Gemini and Genesis Global Capital, LLC (Genesis) each filed a motion to dismiss the SEC’s ill-conceived lawsuit relating to the Earn program (see January 13th update below). The SEC’s action does nothing to speed up the Genesis bankruptcy case or unlock assets that need to be returned to Earn users. We will continue to defend this case vigorously and ensure that it does not distract us from our important work to help Earn users recover their assets.

Gemini Master Claim. On Monday, May 22, 2023, Gemini filed the Gemini Master Claim for the return of over $1.1 billion of digital assets that Genesis has refused to return to the 232,000 Earn users who had active loans as of January 19, 2023. The Gemini Master Claims asserted against Genesis (and its related entities) have been assigned claim numbers 356, 369, and 400, respectively, and can be viewed here.

Case Process. While no forbearance has been granted to Digital Currency Group, Inc. (DCG) in relation to its missed obligations to pay the Genesis bankruptcy estate $630 million (due May 9 – 11th), the parties remain engaged in negotiations around the contribution to be provided by DCG to the Genesis bankruptcy estate. To that end, DCG and creditors exchange proposals this week and continue work towards a resolution. As a reminder, the 30-day mediation process ends May 31st.

In parallel, Gemini is continuing to work with Genesis, the Unsecured Creditors Committee (UCC), and the Ad Hoc Group of Creditors (AHG) on an amended plan of reorganization that could be advanced without DCG’s consensual participation should the mediation fail and that will achieve the best possible outcome for Earn users.

The Gemini team has been working on three items regarding Earn this week:

• First, Digital Currency Group, Inc. (DCG), the parent company of Genesis Global Capital, LLC (Genesis) did not pay the approximately $630 million that came due last week. Genesis, the Unsecured Creditors Committee (UCC), the Ad Hoc Group of Creditors (AHG), and Gemini are considering whether to provide a forbearance to DCG to avoid a DCG default. Consideration will be based in part on whether the parties believe DCG will engage in good faith negotiations on a consensual deal. 

• Second, in the event a deal cannot be reached, Gemini (along with the other parties) is working with Genesis to suggest terms for an amended plan of reorganization that could be advanced without DCG’s consensual participation. To that end, on Friday (5/19), Genesis filed a motion with the Bankruptcy Court seeking to extend its period of exclusivity to propose such a plan. This would be a plan that would have Gemini’s input if not outright support.

• Third, Gemini has been preparing the Gemini Master Claim, which must be filed on Monday (5/22). The Gemini Master Claims seeks the return of over $1.1 billion of digital assets that Genesis has refused to return to the 232,000 Earn users who had active loans as of January 19, 2023. 

Genesis Global Capital, LLC (Genesis), Digital Currency Group, Inc. (DCG), the Unsecured Creditors Committee (UCC), the Ad Hoc Group of Creditors (AHG), and Gemini remain engaged in the 30-day mediation process ordered by Bankruptcy Judge Lane. The mediation status conference scheduled for May 8, 2023, was canceled as discussions remain ongoing.

Earlier this week, DCG loans of approximately $630 million came due to the Genesis bankruptcy estate (money that is due for the benefit of all creditors) on May 9th - 11th. It is our understanding from Genesis that DCG missed these loan payment dates and that DCG may be subject to default as a result. Gemini is in discussions with Genesis, the UCC, and the AHG regarding appropriate next steps.

Earn users today received an important email reminder regarding the May 22, 2023 bar date by which claims in the Genesis bankruptcy proceedings must be filed. As a reminder, Gemini will be filing a master proof of claim (Master Claim) on behalf of all Earn users with respect to all loans made by Earn users to Genesis and not repaid as of January 19, 2023. The Master Claim will also include a claim for interest, loan fees, and new tokens, if any, owed to Earn users as of January 19, 2023.  Earn users can find additional information about the Master Claim on their individual account pages and in our direct email communication. No action is required on your part. However, if you intend to assert a claim for amounts greater than the amounts shown in your pending balance, the Gemini Bar Date Notice provides important information for doing so.

On May 1, 2023, Genesis Bankruptcy Judge Lane entered an order directing Genesis, Digital Currency Group (DCG), the Unsecured Creditors Committee (UCC), the Ad Hoc Group of Creditors (AHG) (previously referred to as the Creditor Committee), and Gemini to begin a 30-day process to mediate “the contribution to be provided by DCG and its affiliates” to the Genesis bankruptcy.

The Mediation Order appointed former Bankruptcy Judge Randall J. Newsome as the mediator and directed the parties to hold at least two substantive mediation sessions before Monday, May 8, 2023. Both substantive mediation sessions occurred this week, on May 4th and May 5th respectively, and were attended by professionals and representatives from all interested parties. While the mediation is confidential, discussions towards a resolution remain ongoing between the parties and the next status conference regarding the mediation is scheduled for next Monday on May 8, 2023 before Judge Lane.

This week, Genesis, Digital Currency Group (DCG), the Unsecured Creditors Committee (UCC), the Creditor Committee, and Gemini agreed to start a 30-day mediation process to drive to a final resolution as soon as possible. An order from Bankruptcy Judge Lane directing the mediation is expected to be entered as early as Monday.

By way of background, a Term Sheet reflecting an agreement in principle was filed on February 10, 2023. Last week, the UCC presented revised terms to DCG for its contribution to the Genesis creditors based on the UCC's continuing investigation (see April 21, 2023 update). The mediation will be narrowly focused on DCG’s economic contribution to the bankruptcy estate for the benefit of all creditors, including Earn users, and is designed to bring resolution to the Genesis bankruptcy plan.

The proposed mediation provides for two meetings before May 8th. This is an important date because on May 9th - 11th, DCG owes the Genesis bankruptcy estate $630 million (money that is due for the benefit of all creditors). If DCG is unable to pay and/or restructure its debt, DCG risks defaulting on its obligations. So while the mediation is scheduled for up to 30 days, the parties are expected to work expeditiously towards agreement in the immediate window.

Gemini is supportive of mediation and looks forward to the start of this process next week and working with the parties to bring this to a conclusion. We have also expressed our frustration on the record before Judge Lane on the pace of progress among the parties and the need for urgency. The next status conference with the Court will be on May 4th. 

On April 21, 2023, the Unsecured Creditors Committee (UCC) provided an update on the status of its investigation into the various intercompany loans and transactions between Genesis entities and Digital Currency Group (DCG) prior to Genesis halting withdrawals on November 16, 2022. Information is available here. The UCC has also presented a revised Term Sheet to DCG based on its continuing investigation. Discussions between the UCC and DCG remain ongoing. Gemini continues to offer support and work with the Creditor Committee and the UCC and will update you as soon as we have more information to share.

This week we sent a message to all Earn users regarding the Bar Date Order (please see below).

The Unsecured Creditor Committee (UCC) continues their work to maximize creditor recoveries as discussed in more depth in our March 31st update. Gemini continues to offer support and work with the Creditor Committee and the UCC. We expect this work to be completed in the coming weeks and will update you as soon as we have more information to share.

The following message was shared with Earn users today:

As discussed in last week’s update, the Unsecured Creditor Committee (UCC) continues their work to maximize creditor recoveries (please see below). Gemini continues to offer support and work with the Creditor Committee and the UCC. We expect this work to be completed in the coming weeks and will update you as soon as we have more information to share.

The PSA is currently in a holding pattern while the Unsecured Creditor Committee (UCC) continues their due diligence on the economic recoveries provided for in the Term Sheet and investigating the various intercompany loans and transactions between Genesis entities and DCG prior to Genesis halting withdrawals on November 16, 2022. This is all being done in the UCC's fiduciary capacity for the purpose of evaluating and maximizing creditor recoveries. While time-consuming, it is important work that economically benefits all creditors, including Earn users. We expect this work to be completed in the coming weeks, at which point we expect the parties to finalize their negotiations on the Plan Support Agreement (PSA) shortly thereafter. Once signed, the PSA sets forth key milestone dates for the remainder of the Genesis bankruptcy proceeding that must be met. This will allow us to provide more certainty around dates going forward and the completion of this process. We appreciate your patience and support while we work with the UCC to advocate on your behalf and look forward to reaching the next stage of this process.

The parties continue to work on drafting the PSA. Gemini continues to work with the Creditor Committee and the UCC to advocate on behalf of Earn users. Genesis financial statements were filed in the Genesis Bankruptcy proceeding this week. The next hearing is the Omnibus Hearing, which is scheduled for March 30th and will provide for a number of motions related to the furtherance of the case to be heard. Following that will be the Meeting of Creditors, which is scheduled for April 13th and will provide an opportunity for creditors to ask Genesis questions. The recently filed Genesis financial statements and information regarding the Omnibus Hearing and the Meeting of Creditors can be found here.

The parties continue to work on drafting the PSA. Gemini continues to work with the Creditor Committee and the UCC to advocate on behalf of Earn users.

The parties continue to work on drafting the PSA. The next hearing in the Genesis Bankruptcy proceeding is scheduled for this upcoming Wednesday, March 15th. As a reminder, we will continue to update this page every Friday until a resolution is reached. Returning your assets is our highest priority and we are operating with the utmost urgency.

The parties continue to work on drafting the PSA. The next hearing in the Genesis Bankruptcy proceeding is scheduled for Wednesday, March 15th.

The Creditor Committee, Genesis, and DCG are still in the process of drafting the Plan Support Agreement (PSA). The Unsecured Creditor Committee (UCC) is coming up to speed and will be reviewing PSA and and the Amended Plan of Reorganization. The UCC's purpose is to represent creditors and advocate on their behalf during the Chapter 11 process.

The Creditor Committee, Genesis, and DCG are in the process of drafting the Plan Support Agreement. The next hearing in the Genesis Bankruptcy proceeding is the Second Day Hearing, which is scheduled for Wednesday, February 22nd.

Today, Genesis filed a Term Sheet with the Bankruptcy Court that reflects the agreement in principle reached between Gemini, Genesis, DCG, and other creditors on a plan that provides a path for Earn users to recover their assets. [Term Sheet PDF]

The parties will now begin drafting the Plan Support Agreement (PSA), a binding agreement between the parties, and the Amended Plan of Reorganization. Once finalized, these documents will be submitted to the Court for approval. This process is expected to take 1-3 months. We expect distributions to begin shortly thereafter.

Important: Starting today, we will move from bi-weekly updates to weekly updates on every Friday to better reflect the cadence of information we expect to receive during the remainder of this process until final resolution is reached.

No material update.

Today, Gemini reached an agreement in principle with Genesis Global Capital, LLC (Genesis), Digital Currency Group, Inc. (DCG), and other creditors on a plan that provides a path for Earn users to recover their assets. This agreement was announced in Bankruptcy Court today. 

This plan is a critical step forward towards a substantial recovery of assets for all Genesis creditors. In addition, Gemini will be contributing up to $100 million more for Earn users as part of the plan, further demonstrating Gemini’s continued commitment to helping Earn users achieve a full recovery. 

We have been working around the clock since November 16, 2022 to reach this milestone. We greatly appreciate your support and patience during this time. It has allowed us to maximize our efforts on your behalf. There is still much work to be done to complete this process, including further due diligence of Genesis financials and judicial approval of this plan, but we are confident that we now have a framework in place to execute on. Thank you for putting your trust in us during this challenging time.

We will continue to update this page on how to participate in the recovery, key dates, information, and milestones as they unfold.

The UCC was selected today. The Creditor Committee, Genesis, and DCG continue to negotiate a global resolution in advance of the next Status Conference in the Genesis Bankruptcy proceeding, which will occur this Monday, February 6th.

The next Status Conference in the Genesis Bankruptcy proceeding will be held on Monday, February 6th. We expect the Unsecured Creditor Committee (UCC) to be selected this week. In the meantime, the Creditor Committee, Genesis, and DCG continue to negotiate a global resolution.

The Creditor Committee, Genesis, and DCG continue to negotiate a global resolution.

The Creditor Committee, Genesis, and DCG continue to negotiate a global resolution.

Yesterday, Genesis filed for bankruptcy under Chapter 11. This is a crucial step towards us being able to recover your assets. This tweet thread has more information. 

No material update.

Yesterday, the SEC filed an action against Gemini and Genesis. We are disappointed by this as it does nothing to further our efforts and help Earn users get their assets back. Nonetheless, we will not let this distract us from the important work we are doing to recover your assets. This tweet thread has more information.

An Open Letter to the Board of DCG, requesting the removal of Barry Silbert as CEO of DCG, was published today. It is now time for the Board to show him the door so that DCG can start working with creditors in earnest to find a resolution. [PDF]

Gemini also filed an Answer in court today in response to a Complaint. Gemini’s Answer contains additional information regarding the fraud that was committed by Barry Silbert, DCG, and Genesis. [PDF]

No material update.

An Open Letter to Barry Silbert, CEO of DCG, was published yesterday. Gemini has stated that Barry Silbert and DCG need to take responsibility for the money owed to Earn users and publicly commit to working together to solve this problem by January 8, 2023.

No material update.

We continued to work through the Christmas holiday towards a resolution. We expect a more fulsome update by the end of this week.

We continue to work with Genesis and DCG and are operating with the utmost urgency. All parties remain engaged and collaborative. We will continue to work on your behalf around the clock through the holidays — we will not be slowed down because of this.

Today, Houlihan Lokey presented a plan on behalf of the Creditor Committee to resolve the liquidity issues at Genesis and DCG and provide a path for the recovery of assets. This plan is based on information received from Genesis, DCG, and their respective advisors to date. The Creditor Committee expects an initial response this week.

Houlihan Lokey, the Financial Advisor of the Creditor Committee, has begun advocating for a plan to resolve the liquidity issues at Genesis and DCG and provide a path for the recovery of funds. It is still early stages, and discussions are ongoing, however, we'll update you as soon as more information is available.

No material update.

No material update.

Houlihan Lokey has been engaged as Financial Advisor on behalf of the Creditor Committee.

Earn Update page is launched.

Kirkland & Ellis has been engaged as counsel on behalf of the Creditor Committee.

Message sent to Earn users

On November 16, 2022, Genesis — the lending partner of the Earn program — paused withdrawals and messaged that they would not be able to meet Earn user redemption requests within the service-level agreement (SLA) of 5 business days. Gemini subsequently paused withdrawals on the Earn program. Blog post here.