Gemini Trust, in a significant move, has proposed a reorganization plan that could substantially reduce payouts for creditors involved in its Gemini Earn initiative. This plan could result in creditors seeing a significant reduction of up to 70% in their anticipated cryptocurrency payouts.
The reorganization plan, detailed in an X post on December 13 and communicated via email to creditors, is open for voting. According to the proposal, creditors will receive payouts linked to their Earn crypto balances as of January 19, 2023, coinciding with Genesis Global Capital’s bankruptcy filing, Gemini’s crypto lending partner at the time.
However, the current market values of major cryptocurrencies like Bitcoin (BTC) and Ether (ETH) are significantly higher than they were at that time.
Bloomberg analyst James Seyffart highlighted the disparity in cryptocurrency values, citing Bitcoin and Ether’s prices at $20,940 and $1,545, respectively, on the referenced date, compared to their current values of $42,794 and $2,276.
Under the proposed plan, even at a 61% recovery rate, the value of a creditor’s Bitcoin holdings from their Gemini Earn account could be deemed equivalent to just $12,773, representing a mere 30% of Bitcoin’s current market value.
Creditors have until January 10, 2024, at 4 pm Eastern Time to cast their vote on the proposed plan. If accepted, the plan will then undergo final approval by the bankruptcy court, with a decision expected on February 14, 2024.
The potential significant reduction in payouts has sparked outrage among Gemini’s customers, with many expressing their dissatisfaction on the platform. Users have criticized the proposal as a betrayal, considering Gemini’s prior assurance that it would not face counterparty risk from its association with Genesis.
Several users have called for full repayment, stating that anything less would be unacceptable. Gemini Earn allowed users to earn interest on their crypto holdings, and the exchange is now aiming to recover $1.6 billion from Genesis for its Earn users.
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