Genesis Creditors Challenge DCG's Repayment Claims, Allege $26M Unsettled Debt
Summary:
Digital Currency Group (DCG) asserts that it has repaid all debts to Genesis, a bankrupt cryptocurrency lender. However, a group of Genesis creditors claim that DCG still owes substantial amounts. The creditors have taken issue with the form of repayment, arguing that it doesn't conform to the Partial Repayment Agreement, which doesn't allow repaying via "illiquid instruments". These include Grayscale Ethereum Classic Trust (ETCG) and Grayscale Ethereum Trust (ETHE), which have not been approved by the SEC and are traded over the counter. As per the creditors, only after these shares are sold, and Bitcoin is purchased at DCG's expense, a proper balance can be figured. DCG has yet to respond to these accusations.
Digital Currency Group (DCG) avows that it has paid off its total outstanding balance to the insolvent cryptocurrency lending platform, Genesis. However, a self-appointed collection of Genesis creditors reported in documents registered with the Southern District of New York Bankruptcy Court that a significant debt is still owed by DCG. The creditors informed the court on January 8 that the sum of unpaid interest and late fees stands at $26 million. Moreover, the method of repayment is under scrutiny, with the creditors stating that the Partial Repayment Agreement does not authorize any form of payment apart from USD and Bitcoin (BTC) nor does it allow a for repayment through the transfer of illiquid assets that cannot be translated into cash or distributed to creditors in lieu of their claims.
“Illiquid instruments,” as referred to by the creditors, include the Grayscale Ethereum Classic Trust (ETCG) and Grayscale Ethereum Trust (ETHE), which were previously used as collateral. As of early December, the ETCG's market price reflected a 69% discount over its net asset value, while ETHE stood at a 50% discount. These funds, not approved by the United States Securities and Exchange Commission (SEC) are traded over the counter. Only after the sale of ETCG and ETHE shares, followed by the purchase of Bitcoin (BTC), at DCG's expense, can an accurate account of repayment be ascertained, claim the creditors.
A formal group of unsecured creditors filed a statement on January 8, which showed that under a modified partial repayment agreement on November 28, DCG acknowledged an aggregate principal loan amount of 2,737.77102141 BTC and 14,048 Bitcoin Cash (BCH) with 10.12600241 BTC worth of late fees. On January 5, DCG reported the repayment of loans from its associate, Genesis. In November 2022, Genesis halted withdrawals and filed for Chapter 11 bankruptcy protection in the succeeding January. When asked to comment on these claims from the creditors by Cointelegraph, DCG has yet to respond.
Published At
1/9/2024 9:35:00 PM
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