Crypto Lender Genesis Prepares to Liquidate Without Deal With Parent Company
The move comes after New York’s attorney general filed a lawsuit against Genesis and parent Digital Currency Group
The move comes after New York’s attorney general filed a lawsuit against Genesis and parent Digital Currency Group
Crypto lender Genesis Global is pursuing a chapter 11 liquidation plan that abandons a previous settlement proposal to restructure the $1.7 billion in loans it extended to its parent company Digital Currency Group.
Genesis filed court papers Wednesday for a plan to exit from chapter 11 without a resolution of its claims against DCG, the crypto conglomerate founded by finance veteran Barry Silbert. Genesis is now preparing to liquidate its assets without the settlement proposal reached in August that intended to deliver estimated recoveries of between 70% to 90% for Genesis customers, including users of crypto exchange Gemini Trust’s Earn program.
The settlement proposal didn’t get the support of key stakeholders, notably Gemini and its founders, the Winklevoss brothers, and the parties had been in continuing negotiations. Ultimately, Genesis was unable to reach an agreement with DCG on final debt terms, Genesis said in filings with the U.S. Bankruptcy Court in New York.
And last week, New York Attorney General Letitia James filed a lawsuit against Gemini Trust, Genesis and DCG for allegedly defrauding more than 230,000 investors of more than $1 billion. In light of the lawsuit, Genesis and the official committee representing its customers determined that a settlement with DCG isn’t a viable route, Genesis said in the filings.
A Genesis spokesperson said the lawsuit’s claims against the company have no basis, and it has been cooperating with all authorities.
A DCG spokesperson last week said the firm was blindsided by the lawsuit because it cooperated with the attorney general’s investigation. Gemini last week said it disagreed with being named in the lawsuit because the company and its Earn program investors are victims of fraud.
The attorney general’s lawsuit alleges that Gemini misled investors in the Earn program by failing to disclose its risks despite knowing that Genesis’s cryptocurrency loans were undercollateralized and heavily concentrated.
Under the new plan, Genesis customers can expect estimated recoveries of between 61% to 77%, pending court approval. Genesis filed for bankruptcy in January in the wake of the collapse of crypto exchange FTX.
The customers’ estimated recoveries under the new plan is smaller compared with a settlement with DCG that would have delivered more value upfront. Now, customers would have to wait for the outcome of litigation against DCG seeking to collect on its outstanding loans from Genesis.
A DCG spokesperson said in an email that the company remains committed to reaching a fair resolution for all parties, and that a resolution through litigation would result in far lesser recoveries for creditors. The spokesperson also said the company is “fully prepared to defend and win.”
The prior settlement was meant to restructure DCG’s debts to Genesis, including about $630 million in a past-due unsecured loan, and a $1.1 billion unsecured promissory note due in 2032.
Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Couples find that lab-grown diamonds make it cheaper to get engaged or upgrade to a bigger ring. But there are rocky moments.
Wedding planner Sterling Boulet has some advice for brides-to-be regarding lab-grown diamonds, which cost a fraction of the natural ones.
“If you’re trying to get your man to propose, they’ll propose faster if you offer this as an option,” says Boulet, of Raleigh, N.C. Recently, she adds, a friend’s fiancé “thanked me the next three times I saw him” for telling him about the cheaper lab-made option.
Man-made diamonds are catching on, despite some lingering stigma. This year was the first time that sales of lab-made and natural mined loose diamonds, primarily used as center stones in engagement rings, were split evenly, according to data from Tenoris, a jewellery and diamond trend-analytics company.
The rise of lab-made stones, however, is bringing up quirks alongside the perks. Now that blingier engagement rings—above two or three carats—are more affordable, more people are dealing with the peculiarities of wearing rather large rocks.
Esther Hare, a 5-foot-11-inch former triathlete, sought out a 4.5-carat lab-made oval-shaped diamond to fit her larger hands as a part of her vow renewal in Hawaii last year. It was a far cry from the half-carat ring her husband proposed with more than 25 years ago and the 1.5-carat upgrade they purchased 10 years ago. Hare, 50, who lives in San Jose, Calif., and works in high tech, chose a $40,000 lab-made diamond because “it’s nuts” to have to spend $100,000 on a natural stone. “It had to be big—that was my vision,” she says.
But the size of the ring has made it less practical at times. She doesn’t wear it for athletic training and swaps in her wedding band instead. And she is careful to leave it at home when traveling. “A lot of times I won’t take it on vacation because it’s just a monster,” she says.
The average retail price for a one-carat lab-made loose diamond decreased to $1,426 this year from $3,039 in 2020, according to the Tenoris data. Similar-sized loose natural diamonds cost $5,426 this year, compared with $4,943 in 2020.
Lab-made diamonds have essentially the same chemical makeup as natural ones, and look the same, unless viewed through sophisticated equipment that gauges the characteristics of emitted light.
At Ritani, an online jewellery retailer, lab-made diamond sales make up about 70% of the diamonds sold, up from roughly 30% two years ago, says Juliet Gomes, head of customer service at the company, based in White Plains, N.Y.
Ritani sometimes records videos of the lab-diamonds pinging when exposed to a “diamond tester,” a tool that judges authenticity, to show customers that the man-made rocks behave the same as natural ones. “We definitely have some deep conversations with them,” Gomes says.
Not all gem dealers are rolling with these stones.
Philadelphia jeweller Steven Singer only stocks the natural stuff in his store and is planning a February campaign to give about 1,000 one-carat lab-made diamonds away free to prove they are “worthless.” Anyone can sign up online and get one in the mail; even shipping is free. “I’m not selling Frankensteins that were built in a lab,” Singer says.
Some brides are turned off by the larger bling now allowed by the lower prices.When her now-husband proposed with a two-carat lab-grown engagement ring, Tiffany Buchert, 40, was excited about the prospect of marriage—but not about the size of the diamond, which she says struck her as “costume jewellery-ish.”
“I said yes in the moment, of course, I didn’t want it to be weird,” says the physician assistant from West Chester, Pa.
But within weeks, she says, she fessed up, telling her fiancé: “I think I hate this ring.”
The couple returned it and then bought a one-carat natural diamond for more than double the price.
When Boulet, the wedding planner in Raleigh, got engaged herself, she was over the moon when her fiancé proposed with a 2.3 carat lab-made diamond ring. “It’s very shiny, we were almost worried it was too shiny and was going to look fake,” she says.
It doesn’t, which presents another issue—looking like someone who really shelled out for jewellery. Boulet will occasionally volunteer that her diamond ring came from a lab.
“I don’t want people to think I’m putting on airs, or trying to be flashier than I am,” she says.
For Daniel Teoh, a 36-year-old software engineer outside of Detroit, buying a cheaper lab-made diamond for his fiancée meant extra room in his $30,000 ring budget.
Instead of a bigger ring, he got her something they could both enjoy. During a walk while on an annual ski trip to South Lake Tahoe, Calif., Teoh popped the question and handed his now-wife a handmade wooden box that included a 2.5-carat lab-made diamond ring—and a car key.
She put on the ring, celebrated with both of their sisters and a friend, who was the unofficial photographer of the happy event, and then they drove back to the house. There, she saw a 1965 Mustang GT coupe in Wimbledon white with red stripes and a bow on top.
Looking back, Teoh says, it was still the diamond that made the big first impression.
“It wasn’t until like 15 minutes later she was like ‘so, what’s with this key?’” he adds.
Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’