Genesis creditors advocate for Winklevoss’ $1.1 billion promissory note as company nears bankruptcy filing

• Genesis’ promissory note was recently mentioned by Gemini co-founder Cameron Winklevoss as well.
• Barry Silbert, CEO of Digital Currency Group (the parent company of Genesis), claimed the note is not callable as it matures in 2032.
• Genesis and Gemini are facing charges from the Securities and Exchange Commission for selling unregistered securities in the form of the Earn program.

Genesis is facing one hurdle after another as problems for the crypto company continue to mount on Thursday. Since it halted withdrawal in November 2022, Genesis has been accused of wrongdoing multiple times by Gemini founder Cameron Winklevoss, with proof of the same now coming to light.

Genesis creditors support Winklevoss

Genesis creditors, as per reports from The Block, have claimed a promissory note worth nearly $1.1 billion was listed as a current asset to make the company’s balance sheet appear stronger than it was. The promissory note, which was first brought to light by Cameron Winklevoss last week, is usually counted under liabilities in a company’s balance sheet, except Genesis placed it under assets.

The creditors' claims were backed with documents from October and November 2022, wherein Genesis listed more than $1.7 billion in its “Current Assets” section. This led to Genesis’ creditors being misled about the company’s financial health, inadvertently confirming Winklevoss's claims.

The promissory note, which is labeled to be worth $1.1 billion, would not be valued at its face value but will actually be heavily discounted. Its net present value is expected to be closer to $300 million, suffering a 70% discount.

Responding to these claims, Genesis's parent company Digital Currency Group CEO Barry Silbert, stated that the note is set to mature in 2032. This makes the note callable, and as per Silbert, it does not constrain any similarity to callable bonds either. He added,

“The $1.1B promissory note… represents DCG’s assumption of liabilities owing to Genesis from Three Arrows Capital in connection with their default in June 2022 ... DCG did not receive any cash, cryptocurrency, or other form of payment for the promissory note.”

In addition, Genesis is also expected to file for bankruptcy this week, as claimed by sources close to the company.

Genesis faces the SEC

While on the one hand, Genesis is facing the wrath of Winklevoss and Gemini, on the other hand, it is defending itself against the Securities and Exchange Commission (SEC). Earlier last week, both Gemini and Genesis were charged by the SEC for violating securities law with their Earn program.

According to the US regulatory body, the companies were offering unregistered securities to retail investors through this program. This led to the commission pursuing the case as a violation of law and alleged misconduct, seeking permanent injunctive relief and civil penalties.

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