Digital Currency Group Owes Its Subsidiary, Genesis Global, More Than $1.65 Billion

CoinDesk reported that the bankruptcy filings for Genesis Global and its related companies reveal that the parent company, Digital Currency Group (DCG), owes more than $1.65 billion to its affiliates. The three entities that filed for bankruptcy protection are Genesis Global Holdco (GGH), Genesis Global Capital (GGC), and Genesis Asia Pacific (GAP). 

According to a Friday declaration filed with the Southern District of New York bankruptcy court, DCG’s debt to Genesis includes a $575 million loan due in May of this year and a $1.1 billion promissory note due in June 2032. 

A special committee is investigating the lending practices between Genesis Global Capital (GGC) and Digital Currency Group (DCG) to see if the bankrupt companies have any legal claims against DCG that could aid in the restructuring process. The investigation is being conducted by the law firm Cleary Gottlieb Steen & Hamilton LLP, which represents Genesis in the proceedings, and is led by Lev Dassin, a former Acting U.S. Attorney for the Southern District of New York. 

The investigation is focusing on GGC’s lending of around $850 million in unsecured loans to DCG entities, the DCG promissory note, transactions that restructured the $850 million in unsecured loans in November 2022, DCG’s alleged exercise of a $52.5 million set-off in November 2022, the handling of the DCG note by GGC and DCG entities for accounting and other purposes, and related communications with lenders, dividends paid by the Debtors (GGC, GGH, and GAP) to DCG, and other conduct between the DCG Entities and the company.

The special committee is also investigating potential avoidance actions and types of actions concerning Digital Currency Group (DCG) entities, Gemini Trust Company, LLC, and other Genesis lenders. An avoidance action means that the debtors will look to avoid or invalidate certain fund transfers that were made before they filed for Chapter 11 protection.

The recent bankruptcy filing by Genesis is just the latest in a series of high-profile collapses that have impacted the cryptocurrency industry over the past year, including the Terra implosion and, more recently, the FTX crypto exchange failure.

CEO Cameron Winklevoss has since publicly criticized Genesis, DCG, and its CEO, Barry Silbert. Prior to filing for Chapter 11, Genesis had been trying to raise fresh capital or reach a deal with creditors. The bankruptcy papers indicate that the company owed $3.5 billion to its top 50 creditors.