1/ Genesis Ch 11 Finding:
How GBTC went to a 50% discount.
Summary:
- Genesis pledges GBTC to #GeminiEarn
- Genesis suspends withdrawals.
- Gemini forecloses on GBTC collateral
- Gemini sells GBTC to a private buyer causing spread to widen
Timeline thread...
How GBTC went to a 50% discount.
Summary:
- Genesis pledges GBTC to #GeminiEarn
- Genesis suspends withdrawals.
- Gemini forecloses on GBTC collateral
- Gemini sells GBTC to a private buyer causing spread to widen
Timeline thread...
2/ August 15th
~2 months after 3AC collapse.
Gemini enters into a Security Agreement (e.g., $465 MM of GBTC pledged: ~31 MM units of GBTC @ $15.06)
A risk manager at Gemini Earn says 'Hey Genesis - we have a lot of unsecured risk on you. Please post collateral asap'
~2 months after 3AC collapse.
Gemini enters into a Security Agreement (e.g., $465 MM of GBTC pledged: ~31 MM units of GBTC @ $15.06)
A risk manager at Gemini Earn says 'Hey Genesis - we have a lot of unsecured risk on you. Please post collateral asap'
3/ The risk manager was likely concerned about Genesis:
i) increasing counterparty concentration risk
ii) the decline in Genesis's loans outstanding
iii) fallout / contagion risks from Gemini.
They may have been concerned about another 3AC.
i) increasing counterparty concentration risk
ii) the decline in Genesis's loans outstanding
iii) fallout / contagion risks from Gemini.
They may have been concerned about another 3AC.
4/ November 7th - Gemini and Genesis modify the Security Agreement.
They agree to 'term out' the agreement - giving Genesis more time to pay back Gemini Earn creditors.
November 8th - FTX stops withdrawals.
The parties are negotiating while FTX is blowing up in the background
They agree to 'term out' the agreement - giving Genesis more time to pay back Gemini Earn creditors.
November 8th - FTX stops withdrawals.
The parties are negotiating while FTX is blowing up in the background
5/ November 10th - Gemini, Genesis enter into a second amendment to the security agreement.
This time - DCG is also a party to the agreement
DCG steps in to help Genesis likely by pledging another 31 MM of GTBC accumulated from its GBTC buying spree
This time - DCG is also a party to the agreement
DCG steps in to help Genesis likely by pledging another 31 MM of GTBC accumulated from its GBTC buying spree
https://twitter.com/ramahluwalia/status/1598798623403229184?s=20&t=BLXdlFypYal4RKPZguvy1g
6/ November 16 - Genesis suspends withdrawals.
On the same day, Gemini forecloses on the GBTC collateral in its possession at $9.20 per share in a private sale.
On Nov 7, the shares were worth $12.15.
The sale of GBTC (~5% of GBTC outstanding) requires a ~25% haircut to move
On the same day, Gemini forecloses on the GBTC collateral in its possession at $9.20 per share in a private sale.
On Nov 7, the shares were worth $12.15.
The sale of GBTC (~5% of GBTC outstanding) requires a ~25% haircut to move
7/ A chart depicting what happened on Nov 10th (pledge date) and Nov 16th (Genesis suspends withdrawals & Gemini liquidates)
The private buyer likely hedged their risk via shorting or sold GBTC in the open market causing the discount to widen.
The private buyer likely hedged their risk via shorting or sold GBTC in the open market causing the discount to widen.
8/ The sale generated proceeds of $284 MM. Gemini notified Genesis of the foreclosure and sale.
Genesis disputes whether Gemini's foreclosure and was sale was completed in a commercially reasonable manner with sufficient notice
(Translation: DCG/Genesis goes ballistic)
Genesis disputes whether Gemini's foreclosure and was sale was completed in a commercially reasonable manner with sufficient notice
(Translation: DCG/Genesis goes ballistic)
9/ Note: To this date - Genesis has not delivered the 'second tranche' of GBTC that it pledged to Gemini on November 10th
They must have been shocked that Gemini liquidated GBTC collateral and didn't want GBTC assets to dump on the market again
They must have been shocked that Gemini liquidated GBTC collateral and didn't want GBTC assets to dump on the market again
10/ There is the question of Rule 144 which limits the issuer and affiliates of a security to sell no more than 1% of its holdings.
The GBTC holdings would be considered 'restricted securities' under the statute.
Read more about Rule 144 here:
sec.gov/reportspubs/in…
The GBTC holdings would be considered 'restricted securities' under the statute.
Read more about Rule 144 here:
sec.gov/reportspubs/in…
11/ Those events are going to raise questions for securities lawyers. Can Genesis or DCG pledge 'restricted securities' as collateral?
Technically, in foreclosure legal title changes from Genesis/DCG to Gemini Earn. Is that sufficient to remove restriction? (I don't believe so)
Technically, in foreclosure legal title changes from Genesis/DCG to Gemini Earn. Is that sufficient to remove restriction? (I don't believe so)
12/ Was there a possible violation of Rule 144 by DCG/Genesis?
Zooming out - b/c GBTC was pledged to Gemini, the value of that asset should ultimately find its way to Genesis unsecured creditors.
And that's great for Genesis creditors.
Zooming out - b/c GBTC was pledged to Gemini, the value of that asset should ultimately find its way to Genesis unsecured creditors.
And that's great for Genesis creditors.
13/ If you want to learn more about the GBTC 'WidowMaker' trade do check out my Odd Lots podcast with @TheStalwart and @tracyalloway
bloomberg.com/news/articles/…
bloomberg.com/news/articles/…
meant to say ‘fallout contagion risks from 3AC’. Gemini has no contagion risk since it did not invest as a principal in the loans using its balance sheet. @elonmusk Whenedit button?
• • •
Missing some Tweet in this thread? You can try to
force a refresh
