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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: February 16

  • Next update: February 23

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.

The Latest


The starting date of the Confirmation Hearing is now February 26th.

The court took this decision to allow additional time for the Debtor to respond to and consensually resolve outstanding objections.

Even though creditors have already voted to accept the Plan, other parties have raised objections about the Plan, which are best resolved before the Confirmation Hearing.

Genesis’s Motion Authorizing the Sale of Trust Assets, which sought Bankruptcy Court authorization to monetize its interests in GBTC, the Grayscale Ethereum Trust (ETHE), and the Grayscale Ethereum Classic Trust (ETCG), was approved.

With approval, Genesis can now monetize these assets for use in upcoming distributions.

We will provide the next update on February 23rd.

Frequently Asked Questions


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

On January 19th, 2023, Genesis voluntarily filed for Chapter 11 bankruptcy protection. Generally speaking, Chapter 11 cases can take anywhere from 6 - 12 months to complete. Once the Plan is confirmed we will be able to better inform you of the expected distribution values, timing, and schedule.

What happens next?

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

Next, on February 26th, a Plan Confirmation Hearing will be held, during which the judge will decide whether to approve the Plan. This is the final opportunity for the judge to confirm and bind the Plan.

After the Confirmation Hearing, the court will enter a Confirmation Order. At this point, Genesis can begin implementing the Plan and distributions can begin within weeks.

This timeline remains subject to change. Once the process above begins, we’ll be able to better forecast a timeline for distributions.

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, the estimated recovery is 61-100%. If DCG pays its outstanding obligations to Genesis, recoveries have the prospect of reaching 100%. It's important to note that this range is subject to change.

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 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 Plan is confirmed, we will be able to better inform you of the expected distribution values, timing, and schedule. 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.

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.

Was Donut appointed to the Creditor Committee?

Despite not being selected to the Unsecured Creditor Committee, we trust that those selected will fulfill their role in maximizing the recovery for creditors.

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 and made available for withdrawal.

Can I withdraw funds from other lending partners?

Yes. All assets with our non-Genesis lending partners are now available for withdrawal. To withdraw these funds, please log in to your web dashboard.

How much am I able to withdraw?

For members of the Save plan, 5% of your total balance is available to withdraw. For members of the Build plan, 14.5% of your balance is available to withdraw. These percentages represent the amount of funds allocated to non-Genesis partners per plan. The remaining funds are held 1:1 at Genesis, and access to them will adhere to Genesis’ resolution plan.

Why does Save have a different allocation to Genesis than Build?

The Save and Build plans have different compositions and lenders. Each plan contains the relevant lender information within the app.

Where are the remainder of my funds?

Your current balance, after withdrawing the full value of your funds from other lending partners, is with Genesis in its entirety, who continues to prevent withdrawals. Donut is not holding any of your funds nor preventing withdrawals. Deposits on Donut are put to work right away. They are passed directly to lending partners and entered into loans. When you initiate a withdrawal, we call those funds back from lending partners to process your withdrawal.

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.

What’s paused?

All account services on Donut are temporarily paused, with the exception of withdrawals of non-Genesis funds.

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 happens to direct deposits during the pause?

If you have not canceled your Direct Deposit with your employer, it will still arrive to Donut as expected. If your Direct Deposit is received by Donut, please reach out to us at [email protected] and we can provide options.

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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