Last week, Gemini, a cryptocurrency exchange, left creditors of their lending program reeling with shock. They presented a reorganization plan that might reduce their possible returns to almost 40% less than current market values.
The plan's hinge on the January 19, 2023 bankruptcy filing date of the now-defunct Genesis crypto lender has drawn criticism and threats of legal actions.
Keypoints
- According to the proposed reorganization, Gemini Earn customers might see a recovery of only 61% of the value of their crypto holdings, aligning with the bankruptcy date of Genesis in January 2023.
- This proposal has ignited anger among the creditors, who have labeled it as 'extreme' due to the significant recovery in Bitcoin and Ether prices since that time.
- At present prices, 61% recovery effectively equals about 30% of the current fiat value of the crypto.
- Creditors must decide by January 10, 2024, by casting their votes either in favor or against the plan.
- Should the plan get the thumbs up, users will receive an initial distribution of assets. However, if it gets turned down, Genesis will have to consider alternative strategies, delaying payouts further.
The proposal implies that Gemini Earn users would receive payouts based on their balances as of January 19, rather than present-day valuations. With major cryptocurrencies like Bitcoin and Ether skyrocketing 80-90% since January, this slashes the equivalent fiat payouts to around 30%, according to a 61% recovery estimate. Detractors are urging a collective no-vote plea.
This could indeed be harsh. Even at the worst scenario, Gemini Earn users might recover just 61% of their crypto's value as of January 19, 2023. Yikes.
Even a full recovery based on current prices would have a significant impact. This is a 61%-100% range of:
Bitcoin $20,940
Ethereum $1,545 https://t.co/A6u28U3dsi pic.twitter.com/5SKZnlRjr9— James Seyffart (@JSeyff) December 14, 2023
Gemini rolled out the Earn program in 2021, promising returns to users lending crypto to Genesis. Unfortunately, the assurance that client's assets were safe from counterparty risks proved incorrect when Genesis put a hold on withdrawals in November 2022, before declaring bankruptcy under Chapter 11 two months later. Now, Gemini is battling to recover $1.6 billion for nearly 340,000 Earn program members.
Still, the restructuring plan distributes what Genesis had on January 19 while continuing legal battles to acquire more. The problem for many is that tying payouts to January's depressed crypto values left users feeling cheated by Gemini, claiming it conceals substantial fiat losses. With Bitcoin now at $42,000 compared to $21,000 in January, a 61% recovery equals a mere 30% of today's value.
Creditors have until January 10, 2024 to make their decision on the proposal. If approved, Gemini will begin to distribute assets, while also pursuing legal channels to fetch additional funds from Genesis. If creditors reject, Genesis needs to pursue other routes, likely causing further delays. Facing harsh reductions, the choices seem equally unappealing for Earn users.
