The Scoop: Cryptocurrency exchange Bitvavo is owed by Genesis up to $300 million
European cryptocurrency exchange Bitvavo is part of the so-called creditors’ committee that is trying to recover more than $1.8 billion from Barry Silbert’s Genesis Trading and its parent company, Digital Currency Group (DCG). This is according to sources familiar with the matter who spoke directly to Protos.
When the Bahamas-based FTX exchange collapsed in November, Genesis was forced to put redemptions on hold. As a result, in addition to freezing $175 million in Genesis trading assets, Genesis and DCG are left owed to three major creditors — $900 million to Gemini twin Winklevoss, $350 million to a group of investors led by investment firm Eldridge, and according to sources up to 500. $1 million for Bitvavo. (For the record, Bitvavo puts that number closer to $300 million.)
Bitvavo has also allegedly seen its staking software affected. The platform offers up to 10% return on fixed assets and typically claims over $40 million in daily transaction volume.
As part of their efforts to recover their money, Gemini and Bitvavo have formed a creditors’ committee. They also engaged the law firm of Kirkland & Ellis as legal advisor and the global investment bank Houlihan Lockie as financial advisor.
If the creditors succeeded in getting their money back, it could drastically reduce Genesis Trading’s finances.
Read More: What’s Up With Cryptocurrency Exchange Gemini And Its Ties To FTX?
Protos has contacted Bitvavo for comment and will update this story if and when new information becomes available.
Bad debts between Genesis and Gemini
According to the Gemini Earn FAQ, it may be possible to get a refund for Gemini Earn users If only Genesis Trading and DCG could collect loans from the largest debtors.
Genesis and DCG could also raise money in a new equity financing round or seek to restructure its debt. This, however, will take time.
Recently injected DCG $140 million collateral at Genesis Trading To supplement the funds that were frozen on FTX. However, companies will need new sources of financing to pay off their debts.
The original terms of the loan package with Eldridge indicated the balance was due in 2023. However, Eldridge now aims to collect as soon as possible due to the weak positions at DCG and Genesis.
CEO Barry Silbert told shareholders that DCG used the loan from Eldridge and a $575 million loan from Genesis to fund investment opportunities and buy back shares from non-employees.
DCG is pursuing a $1.2 billion claim in the Three Arrows Capital (3AC) bankruptcy case. You have claimed the protection of Genesis Trading. Silbert says DCG is on track to make $800 million in profits in 2022.
Despite the profits, Genesis and DCG are still vulnerable due to $1.7 billion in debt to outside companies and a $175 million loss in the FTX collapse. They may recover if they can recover a large portion of the money from debtors like 3AC. However, they may have to restructure to solve the problem.
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Update 17:35 UTC December 15th: Since this article was published, Bitvavo has contacted Protos to confirm that it is a member of the so-called Creditors Committee.
According to Bitvavo, it has also had multiple lending transactions with Genesis in the past and is actually seeking a net claim somewhere in the region of $250-300 million. This, you say, depends on the value of the underlying crypto-asset.
Bitvavo told Protos, “Based on the information provided by Genesis/DCG, it appears likely that the full amount will be repaid over time.
“In the meantime, and if necessary, Bitvavo has decided to step in to protect users (using off-chain staking services) to ensure that customers can access their funds when needed.”
The address has also been updated to reflect the $300 million figure quoted by Bitvavo.
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