Digital Currency Group (DCG) has reached an agreement with crypto exchange Gemini following the collapse of its subsidiary, Genesis, and the Gemini Earn program. This agreement comes after months of negotiations between the two parties and the subsequent lawsuits from users who were left without funds. The founders of Gemini, Cameron and Tyler Winklevoss, made it clear that their objective was to make their clients whole.
According to a report from TheBlock, DCG and Gemini have proposed a new creditor agreement that aims to return “all of the crypto held by the platform” when it filed for bankruptcy protection. The proposed strategy is to compensate clients with a 70-90% recovery, with a significant portion of the recovery in digital currencies.
Unlike other similar processes, this new agreement would allow users to benefit from any potential rise in the price of Bitcoin and Ethereum. If these cryptocurrencies reach $85,000 and $8,500 respectively, clients would still receive an equivalent amount. This means that clients will receive their funds in their original form rather than freezing them in US dollars.
Genesis’ parent company describes this agreement as a remarkable outcome, given the volatility of the cryptocurrency industry. However, the new agreement is yet to be voted by creditors. The provision allowing clients to benefit from a potential crypto bull run is intended to incentivize creditors to vote in favor of the proposal.
In addition to the creditor agreement, DCG has provided a $630 million loan to Genesis. This loan will be partially repaid in cash and partly through a financial instrument that will be settled by 2025. Genesis currently owes over $1 billion to Gemini’s clients.
The report also highlights that Genesis has posted 60% of this amount as collateral in shares for the Grayscale Bitcoin Trust (GBTC). The potential conversion of GBTC into an exchange-traded fund (ETF) by the US Securities and Exchange Commission (SEC) has positively impacted its value. As a result, the discount between GBTC and the spot price for Bitcoin has been decreasing, which could be beneficial for Gemini Earn clients.
At the current pricing, the Gemini User Collateral is estimated to be worth around $607 million. If Gemini agrees to provide $100 million to Gemini Earn users, or even distribute a small portion of the Gemini User Collateral to them, there would be little doubt that Gemini Earn users would receive a full recovery.
As of now, Bitcoin is trading at $26,100 with sideways movement in the last few days. This information is sourced from Tradingview.
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