Cryptocurrency exchange Gemini stunned its lending program creditors last week by unveiling a proposed reorganization plan that could see their potential payouts cut nearly 40% below current market rates.
The plan ties payout calculations to defunct crypto lender Genesis’ January 19, 2023 bankruptcy filing date, prompting accusations of deception and theft.
Keypoints
- Gemini’s proposed reorganization plan could see Earn users recover as little as 61% of their crypto holdings’ value as of January 19, 2023 when Genesis filed for bankruptcy.
- This has sparked outrage among creditors who call the plan “brutal” given Bitcoin and Ether’s gains since January 19th.
- At current market rates, 61% of holdings could effectively represent just 30% of the crypto’s present fiat value.
- Creditors have until January 10, 2024 to vote yes or no on the plan.
- If approved, there would be an initial asset distribution to users while Gemini continues legal action to recover more funds. If rejected, Genesis would have to explore alternatives potentially delaying payouts.
Under the proposal, Gemini Earn users would receive a distribution equal to their account balance on January 19 rather than present-day values. With top cryptocurrencies like Bitcoin and Ether up 80-90% from January lows, this effectively slashes fiat payouts to around 30% of current totals based on 61% asset recovery projections. Critics decried the plan as “brutal” and unacceptable, urging coordinated rejection votes.
This could be brutal. Granted seems to be worst case scenario but Gemini Earn users could be getting potentially just 61% of the value of their crypto from Jan 19, 2023. WOOF.
Even at 100% it stings based on current prices. Thats 61%-100% of:
Bitcoin $20,940
Ethereum $1,545 https://t.co/A6u28U3dsi pic.twitter.com/5SKZnlRjr9— James Seyffart (@JSeyff) December 14, 2023
Gemini introduced Earn in 2021, promising interest for users lending crypto to Genesis. But assurances that client assets faced no counterparty risk proved false when Genesis froze withdrawals in November 2022 then filed Chapter 11 bankruptcy two months later. Gemini is now battling to recoup $1.6 billion for nearly 340,000 Earn users.
The reorganization plan distributes Genesis assets from January 19 while continuing legal efforts to secure additional funds. But tying payouts to January’s deflated crypto prices outraged users who accuse Gemini of masking the real fiat losses being imposed. With Bitcoin at $42,000 now versus $21,000 in January, a 61% token recovery means just 30% of today’s value.
Creditors have until January 10, 2024 to vote on the proposal. Approval enables initial distributions but ongoing litigation tries extracting more from Genesis. Rejection forces Genesis to investigate alternatives, likely extending timelines by months. For Earn users facing drastic cuts, the options appear equally unpalatable.
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