Promineny crypto exchange Gemini has threatened legal action against Digital Currency Group (DCG) and its founder, Barry Silbert. DCG is embroiled in a financial crisis, failing to fulfil a $630 million payment owed to its subsidiary, Genesis Global Capital.
Gemini has taken swift action by notifying its clients of DCG’s default in a recent update on May 19. The report indicates that Gemini is now collaborating with Genesis and other creditors to provide DCG temporary relief to avert a full-blown default.
Like many other crypto entities, DCG suffered the consequences of the credit crisis that swept through the industry in 2022. Since then, DCG has been engaged in extensive negotiations with creditors of Genesis Capital, which sought bankruptcy protection in January.
Gemini emerges as a creditor to Genesis among the affected parties, having lent substantial customer funds as part of its retail high-yield Earn program. DCG’s Genesis reportedly owes a staggering $900 million to Gemini.
In early May, Gemini issued a stern warning, cautioning that DCG faced the risk of default if it failed to make a $630 million debt payment to Genesis’s bankruptcy estate. Gemini’s most recent update reveals that if an agreement cannot be reached, the exchange intends to collaborate directly with Genesis to propose an amended plan of reorganization that would not require DCG’s consent.
Consequently, Gemini has filed a motion with the bankruptcy court, outlining a new reorganization plan that circumvents the need for DCG’s approval.
In its last update on May 9, DCG announced ongoing discussions with capital providers to secure growth capital and refinance its outstanding intercompany obligations with Genesis. These discussions are crucial for DCG’s survival as the company seeks a lifeline amidst its financial woes.
Meanwhile, Gemini has been diligently preparing a claim, scheduled to be filed today, on behalf of its 232,000 Earn users. The claim seeks the return of a staggering $1.1 billion in cryptocurrencies. The exchange remains committed to advocating for its users, aiming to rectify the situation and recover the funds owed to its Earn program participants.
As the crypto industry grapples with the repercussions of the credit crisis, DCG’s predicament serves as a stark reminder of the risks inherent in this volatile and rapidly evolving market.
The outcome of the ongoing negotiations and potential legal actions against DCG will undoubtedly shape the landscape of the crypto industry in the coming weeks. Crypto enthusiasts and investors eagerly await the resolution of this high-stakes ordeal, hoping for a swift and favourable outcome for all parties involved.
