Bankrupt crypto lender Genesis hits a financial rough patch and is set to settle a whooping $1 billion in claims with the now defunct crypto hedge fund Three Arrows Capital (3AC).
Court documents have revealed that the deal from Genesis is putting up $33 million to put this chapter to rest.
The two parties have inked a deal after some serious back and forth discussions — in a nutshell, the court needs to give its nod of approval for this settlement.
According to the document, 3AC debtors shall receive and allow general unsecured claim against Genesis in the amount of $3 million in full and complete satisfaction of the more than $1 billion in claims asserted against each of the Genesis debtors.
They are also throwing in a mutual release for liability for good measure — meaning the two parties will not be able to sue each other in the future to avoid further litigation and costs.
Genesis & 3AC Bankruptcy Refresher
Genesis was one of the first and largest prime brokers in the crypto space — its primary business lines included OTC trading, custody of assets as well as lending and borrowing. The crypto lending company had a number of institutional clients that it had trading and lending relationships with. And one of these was no other than 3AC which collapsed in June of last year.
Genesis did not only enter into agreements with large institutions though — it also offered its services to retail-facing exchanges and that is how cryptocurrency exchange Gemini came to be a part of this saga.
Gemini was acting as an agent for Genesis whereby Gemini Earn program users would get interest for lending their crypto to Genesis — Gemini would get a cut of this interest given that they were the agents making the connection.
All was well until in November of last year when Gemini Earn users learned that they would not be able to withdraw their assets — this was because of the fact that Genesis was insolvent and had taken a blow from the FTX collapse.
As mentioned, 3AC were big borrowers from Genesis — in total, there were about $2.3 billion worth of loans made to 3AC and these were under collateralized. This means if 3AC was ever to default on any of these loans, Genesis would not have been able to recoup all of the funds with posted collateral — and the default is exactly what happened.
I think this is a positive development for the two parties to reach an agreement so creditors may finally have some relief and will be able to recover their losses in the bankruptcy cases.