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. And this filing is a visible sign of Genesis’s commitment to bringing recoveries to creditors as soon as possible. This is important because this notice starts the clock on approving a Plan, a necessary step towards permitting the distribution of assets to creditors. Notice of Hearings On June 7th, Genesis filed a notice stating its intention to file a Plan and Disclosure Statement. As a reminder, DCG remains in default after missing its obligations to pay the Genesis bankruptcy estate $630 million due on May 9th – 11th.
The mediation remains focused on the contribution to be provided by Digital Currency Group, Inc. 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. 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. 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. 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. 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). Earn users remain hopeful that a resolution will be reached that allows for the return of their assets and end the prolonged withdrawal restrictions they have faced since November 2022.There are three important updates for Earn users this week:
The court will now review the dismissal motion filed by Gemini and Genesis, and the final decision regarding the SEC lawsuit and the fate of Gemini Earn will be determined in due course. The primary objective is to secure the best possible outcome for Earn users, as emphasized by Gemini in its blog post. Gemini and other creditors are collaborating on an “amended plan of reorganization” that can be pursued independently if the mediated negotiations with DCG fail to reach a satisfactory agreement. He believes that the SEC’s actions do not contribute to expediting the process or facilitating the return of assets to affected users. Baughman argues that the lawsuit complicates retrieving assets from the Genesis bankruptcy and delays efforts to compensate Earn users. The SEC’s case has drawn criticism from Jack Baughman, a founding partner of JFB Legal, overseeing the lawsuit. In a blog post addressing Earn users, Gemini criticized the SEC lawsuit as “ill-conceived” and reiterated its commitment to ensuring the optimal outcome for users. Gemini has taken on the role of a transfer agent for the Earn program and maintains that it is responsible for the customer-facing aspects of the platform. While a preliminary deal was proposed in February, it has yet to be finalized, and earlier this month, DCG missed a $630 million loan payment to Genesis. The parent company of Genesis, the Digital Currency Group (DCG), is currently engaged in mediated negotiations with Gemini to develop a restructuring and settlement agreement. To recover funds for affected users, Gemini filed a comprehensive claim seeking over $1.1 billion in assets on behalf of 232,000 Earn users.
In response to the SEC’s lawsuit, Genesis filed for bankruptcy, leading to withdrawal restrictions for Earn users since mid-November 2022.
The companies argue that Gemini Earn should not be classified as a security, asserting that the transactions were essentially loans. The lawsuit alleges that Gemini Earn violated securities regulations by offering unregistered securities to customers who lent their crypto assets to Genesis. Gemini, the prominent cryptocurrency exchange, and bankrupt crypto lender Genesis Global Capital have jointly filed a motion to dismiss a Securities and Exchange Commission (SEC) lawsuit concerning their collaborative product, Gemini Earn.
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