On the 21st of December, Cameron Winklevoss, co-founder of Gemini, announced on Twitter that Houlihan Lokey presented a plan to resolve the liquidity issues at Genesis and DCG.
Earn Update: Today, Houlihan Lokey presented a plan on behalf of the Creditor Committee to resolve the liquidity issues at Genesis and DCG and provide a path for the recovery of assets.
— Cameron Winklevoss (@cameron) December 20, 2022
The Issue started with the crash of FTX, and the subsequent FUD that led to a withdrawal rush for users of centralized projects. At the time, Digital Currency Group, Inc. (DCG), the parent company of Genesis, owes Genesis $1.675 billion. $1.1 billion in the form of a promissory note due in June 2032 and $575 million due in May 2023.
For this reason, Genesis could not honor the withdrawal requests submitted by its users and creditors. The market volatility and the lengthy schedule for DCG to repay its loan made Genesis halt withdrawals on November 16, 2022.
One of their creditors, Gemini, has been in continuous discussions with Genesis Global Capital, LLC (Genesis), Digital Currency Group, Inc. (DCG) in an effort to achieve a resolution as quickly as possible.
Gemini has also created an ad hoc body called the Creditor Committee, with other creditors to better coordinate activities and collectively reach a decision. And Houlihan Lokey was engaged as a Financial Advisor on behalf of the Creditor Committee. The aim was to focus on returning valuable user assets as its top priority.
Houlihan Lokey, an independent investment bank and financial services company, submitted a strategy on behalf of the Creditor Committee on December 21st to fix the liquidity concerns at Genesis and DCG and offer a means to recover user assets.
According to Cameron, the strategy was developed using the information they obtained from Genesis and DCG. Within a week, the Creditor Committee is expecting an adequate response.
If the information is true and this is just a liquidity problem, it would mean Genesis has enough assets to pay its debts but does not now have these assets in a liquid form of payment.
In order to address the problem, Genesis can either Increase cash, raise debt, or restructure current debt. Genesis might raise funding by selling valuable shares.
Raising debt entails issuing more IOUs for a future date to pay off present creditors. Debt restructuring might entail DCG agreeing to pay down its Genesis loans sooner, for example. And each option requires a lot of time to execute.
Nonetheless, Cameron claims that Gemini is doing all possible to fight for Earn users and to speed up Genesis and DCG’s efforts to resolve the situation.
