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Market Update: Genesis pauses withdrawals
Market Update: Genesis pauses withdrawals

New market developments and what they mean for your Donut account

Rickie avatar
Written by Rickie
Updated this week

Communication Schedule


We aim to update this page on Fridays. This provides us with time to review updates and offer information as relevant. For the latest confirmed information, we recommend that you check this page prior to contacting us directly.

  • Last update: May 24

  • Next update: May 31

Recap


On November 16th, 2022, in consultation with their professional financial advisors and counsel, Genesis took the decision to temporarily suspend redemptions and new loan originations in their lending business.

On January 19th, 2023, after two months of negotiations and numerous proposals, Genesis voluntarily filed for Chapter 11 bankruptcy protection. This was an important step for the recovery of funds.

On February 6th, 2023, Genesis announced to the court that they had reached an agreement in principle with and amongst its creditors, and on February 10th, this was publicly filed as a Term Sheet.

On June 13th, 2023, Genesis filed an amended proposed Plan and Disclosure Statement.

On August 28th, 2023, Genesis released an announcement that an agreement in principle had been reached among the Debtors, the UCC, and DCG following the end of mediation.

On October 24th, 2023 the Debtors’ filed a further revised version of their Amended Joint Chapter 11 Plan and Amended Disclosure Statement.

On November 28th, 2023, the Amended Disclosure Statement was approved, and the official solicitation and voting period for the Plan began. It will continue through early January.

On January 25th, 2024 Genesis announced that creditors accepted Genesis's Chapter 11 Plan.

On February 26th, 2024 the Confirmation Hearing started and closing arguments concluded on March 22nd, 2024.

On May 17th, 2024 the court confirmed Genesis' Amended Joint Chapter 11 Plan.

The Latest


Following the court's confirmation of Genesis' Amended Joint Chapter 11 Plan, the next step is for the Debtor to submit the Confirmation Order for the Judge to sign.

We understand the submission will likely happen later today or by next week.

Additionally, the Judge will use the May 30th hearing to review any comments before officially entering the Confirmation Order.

Once the Confirmation Order is entered, we should be in a position to confirm the distribution values, timing, and mechanics, including how to prepare your account.

At the moment, the Debtor and case participants expect distributions to be made by the end of June, and for Donut users to receive 100% of their funds back, though both remain subject to change.

We will provide the next update on May 31st.

Important: Please be aware that Donut, Genesis, and Kroll *will never text you* regarding the Genesis bankruptcy.

Frequently Asked Questions


When will this be resolved so I can withdraw my funds?

On January 19, 2023, Genesis voluntarily filed for Chapter 11 bankruptcy protection. Generally speaking, Chapter 11 cases can take anywhere from 6 - 18 months to complete. As of May 24, 2024, the Debtor and case participants expect distributions to be made by the end of June, though this remains subject to change.

What happens next?

On May 17, 2024, the court confirmed Genesis' Amended Joint Chapter 11 Plan. Next, the Debtors' will submit a Confirmation Order to the court for approval. The Judge will then use a May 30, 2024 hearing to review any comments before officially entering the Confirmation Order. Once the Confirmation Order is approved, we should be in a position to confirm the distribution values, timing of initial distributions, and distribution mechanics, including how to prepare your account. This timeline remains subject to change.

How will withdrawals work?

When the time for withdrawals comes, we will email you with instructions on how to prepare your account and initiate withdrawals. Should distributions occur in tranches you'll likely receive a significant initial portion and the remainder over time.

What are the details of the Amended Plan?

According to the Plan, US dollar creditors can anticipate a 100% recovery, but note that a full recovery is not yet guaranteed at this stage and remains subject to the entry of the Confirmation Order.

Do I need to file a proof of claim?

The Master Proof of Claim was timely and properly filed on behalf of all Donut users. No action is required on your part.

What is Chapter 11 Bankruptcy?

When a company files for Chapter 11 bankruptcy, it asks the court for protection from its creditors while it reorganizes its business and its debts. The goal of a Chapter 11 bankruptcy is for the company to come up with a plan to repay its creditors as much as possible. Under Chapter 11, the company's management remains in control of the business, but it operates under the supervision of the court and a trustee. The company will file a plan of reorganization that outlines how it plans to repay its creditors, and the creditors will have a chance to vote on the plan. If the plan is approved by the court and a majority of the creditors, the company will be able to emerge from bankruptcy and continue operating.

Are all of Genesis’s operations included in this filing?

Genesis Global Holdco LLC, the parent company Genesis Global Capital, and its subsidiaries Genesis Asia Pacific Pte. Ltd and Genesis Global Capital, LLC filed a trio of voluntary petitions with the bankruptcy court. All three fall under the umbrella of Digital Currency Group. Genesis’s derivatives and spot trading, broker dealer, and custody businesses remain active and will be assessed to understand the value that can be contributed from their trading arm to facilitate the obligations of Genesis.

What caused the liquidity mismatch?

To fill the $1.1 billion hole in Genesis’ balance sheet from the 3AC default, DCG entered into a 10-year promissory note with Genesis at an interest rate of 1% – due in 2032. To induce new capital from lenders, Genesis’s team and balance sheet represented this Promissory Note as a Current Asset, able to be quickly converted to cash within 12 months or less. You can think of this instrument as a long-term IOU, that was represented as a short-term IOU on Genesis’ balance sheet. Today, Genesis, DCG, and their advisors deny that this Promissory note is a “Current Asset.” Current assets on a balance sheet include cash, cash equivalents, short-term investments, and other assets that can be quickly converted to cash—within 12 months or less.

Why can’t Genesis liquidate borrower collateral to shore up capital?

Overcollateralization seeks to protect lenders from borrower default. If at any point during the loan, it is no longer overcollateralized, the borrower will be margin called and asked to put up more collateral. If the borrower fails to, the collateral is liquidated. So long as the loans are performing, lenders are unable to liquidate a borrower’s collateral. All the lender (Genesis) can do is wait until the loan matures. This is a liquidity issue with duration mismatch, and what Genesis faces today.

Does Donut still have funds with their other lending partners?

All assets have been safely withdrawn from other lending partners.

Where are the remainder of my funds?

Your current balance is with Genesis in its entirety, who continues to prevent withdrawals. Donut is not holding any of your funds nor preventing withdrawals.

How does Genesis pausing redemptions affect Donut?

Genesis is our principal lending partner at Donut. By pausing redemptions, Donut is unable to withdraw user funds from Genesis.

Will I continue to earn APY during this pause?

No.

Is my account Safe?

Your account continues to be protected with 2FA, your PIN, and the AES-256 data security standard.

What impact does this have on the future of Donut?

When Genesis suspended redemptions, it had a significant and negative impact on Donut. Sadly, we feel we have no other alternative than to take our apron off and announce the discontinuation of Donut. To learn more about the details of this decision click here.

How does Donut closing affect the recovery of my funds from Genesis?

The funds recovered from Genesis will be made available to you for withdrawal in full. Once the Confirmation Order is approved, we should be in a position to confirm the distribution values, timing of initial distributions, and distribution mechanics, including how to prepare your account. We’ll ensure that you have adequate support throughout the recovery process once distributions begin.

How can I log in to my Donut account?

We have migrated user accounts to a new web dashboard. Log in here.

How can I keep up with developments?

We aim to update this page on Fridays. This provides us with time to review updates and offer information as relevant. For the latest confirmed information, we recommend that you check this page prior to contacting us directly.

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