Genesis Global files Chapter 11 bankruptcy with $5.1 billion in debt

By Sarah Lizee

Olympia, Wash., Jan. 20 – Genesis Global Holdco, LLC filed Chapter 11 bankruptcy on Thursday in the U.S. Bankruptcy Court for the Southern District of New York with about $5.1 billion in debt.

Two of the company’s lending business subsidiaries, Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd., are also part of the filing.

Genesis said it has proposed a roadmap to an exit through a Chapter 11 plan that calls for a global resolution of all claims through creation of a trust that will distribute assets to creditors. The company is hoping to finish the process within four months.

“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” Derar Islim, interim chief executive officer of Genesis, said in a press release.

The company said it has over $150 million in cash on hand, which will give it enough liquidity to support its ongoing business operations and facilitate the restructuring process.

Plan terms

The plan contemplates a dual-track process in pursuit of a sale, capital raise, or equitization transaction that would enable the business to emerge under new ownership.

If the marketing process doesn’t result in a sale or capital raise, creditors will receive ownership interests in the reorganized company.

Though the company has filed the Chapter 11 plan with the court, it is still in discussions with its corporate parent company, Digital Currency Group, Inc. (DCG), to which it owes at least $1.65 billion, and two informal groups of lenders representing over $2 billion in outstanding loans.

The company said the plan is intended to provide a transparent path forward, even if it isn’t able to reach a global resolution with DCG and the lenders. In the event a consensual resolution is reached, the plan will be amended.

Under the current plan, administrative claims and secured claims will be paid in full.

Holders of general unsecured claims will receive, depending on whether or not an equitization occurs, a combination of available cash and other assets, equity interests in Genesis Global Holdco and trust units entitling holders to receive their pro rata shares of the proceeds from certain causes of action and other claims of the debtors, including proceeds from a $1.1 billion promissory note via DCG, the $1.65 billion in DCG loans, avoidance actions against various parties and other claims against the DCG entities and lender Gemini Trust Co., LLC.

Subordinated claims will be canceled with no distribution.

Intercompany claims will be adjusted, reinstated, compromised or discharged at the debtors’ discretion.

Interests will be canceled with no distribution.

Other details

Genesis’ largest unsecured claim is a $765.9 million disputed loan payable claim with various lenders on a master digital asset loan agreement with Gemini as agent. The next six largest claims range from $114.51 million to $462.21 million, all listed as loan payable or collateral payable claims. Only two entities were named in that grouping – Mirana Corp. and Moonalpha Financial Services Ltd.

The company has filed a number of customary first-day motions with the court to enable day-to-day operations to continue in the normal course. A hearing on the first-day motions is set for Jan. 24.

Redemptions and new loan originations in the lending business remain suspended, and claims will be addressed through the Chapter 11 process.

Moelis & Co. is acting as financial adviser to the company. Cleary Gottlieb Steen & Hamilton LLP is acting as legal counsel. Alvarez & Marsal is serving as restructuring adviser.

Genesis’ other subsidiaries involved in the derivatives and spot trading and custody businesses and Genesis Global Trading are not included in the filing and continue client trading operations.

Genesis Global is a New York-based cryptocurrency lender. The Chapter 11 case number is 23-10063.

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