Crypto lender Genesis and its parent company Digital Currency Group (DCG) allegedly owe $900 million to Gemini Earn Users, according to a report published on Saturday by the Financial Times, citing sources familiar with the matter.
Gemini runs a product called ‘Earn’ that offers high-yielding interest rates to customers for lending out their cryptocurrencies in association with Genesis as the primary lender. The product offers anywhere from 0.45-8% interest rates depending on the crypto deposited.
According to the report, Gemini has set up a creditors’ committee to bring back the funds from Genesis and its parent company DCG, which billionaire Barry Silbert runs. The committee is now facilitating negotiations between both parties.
Unprecedented market turmoil
After FTX’s dramatic collapse, Genesis announced on Nov. 16 that it’s suspending withdrawals, citing “unprecedented market turmoil.” The company also disclosed that it had about $175 million worth of funds stuck with FTX but waived off speculations of imminent bankruptcy. It was later revealed the lender was under investigation by US regulators.
On the same day, Gemini Earn services were made unavailable. “Gemini Earn Deposits are currently unavailable. There are expected delays for in-progress Redemptions. Further updates to follow,” read the exchange’s status page.
The company finds itself in a rough spot, given the complications of the partnership. DCG, which was founded in 2015 and has backers like Google and Softbank, itself has $2 billion worth of outstanding debt, of which $1.7b is owed to its subsidiary Genesis.
Problems dating back to 3AC
Genesis has had its share of problems after losing around $1.1b in loans to the bankrupt crypto hedge fund Three Arrows Capital, which is also why DCG was forced to take on its liabilities.
Meanwhile, most likely as a last resort, Gemini is working with investment bank Moelis & Co for financing options, per the newspaper. The exchange’s alleged previous attempt to raise funds, however, was unsuccessful.