Digital Currency Group (DCG) and its bankrupt Genesis subsidiary reached an in-principle agreement on terms of a restructuring plan with a group of the firm’s main creditors, according to a person familiar with the situation.
According to a person familiar with the issue, the agreement, which begins to resolve some of the major issues that sent Genesis into Chapter 11 bankruptcy protection, entails winding down the Genesis loan book as well as the sale of the bankrupt Genesis entities.
The term sheet also involves refinancing the outstanding loans where DCG borrowed $500 million in cash and about $100 million worth of bitcoin (BTC) from Genesis, the person said. Included is “an equitization of the infamous 10-year promissory note that DCG gave Genesis in return for failed hedge fund 3AC claims,” the person told Coindesk, without providing details of the process. The promissory note was for $1.1 billion to Three Arrows Capital (3AC), a crypto hedge fund that collapsed last year.
The creditor group has been negotiating on behalf of companies and individuals with claims of around $2.4 billion against the crypto lender. The group is represented by law firms Proskauer and Kirkland as well as restructuring banker Houlihan Lokey.
The proposed deal will now be offered to other creditors, including hundreds of thousands of customers of the Gemini Earn lending product, the person said.
The lending arm of Genesis halted withdrawals on Nov. 16, 2022, in the wake of crypto exchange FTX’s collapse earlier that month. Last month, Genesis‘ lending businesses filed for bankruptcy protection in New York.
DCG which is also the parent company of CoinDesk is yet to comment on the issue.