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It’s been eight days since I submitted a redemption request for my staked crypto in Gemini Earn. I still haven’t seen my money. And the worst part? Gemini doesn’t know when I’m getting my money back, or if I’ll get it back at all.
If our understanding is correct — that this is a liquidity issue (i.e., cash-flow insolvency) — then a full recovery of funds for Earn users is possible. If this is a Genesis balance sheet issue (i.e., balance-sheet insolvency) whereby its assets are less than its liabilities, then a loss of some amount is possible. We do not have an indication at this time that this is a Genesis balance sheet issue, rather a liquidity/cash-flow issue. Our highest priority is to help Earn users recover their funds.¹
I can’t say I’m exactly brimming with confidence after their response, but I suppose they do deserve some credit for trying to communicate updates frequently and transparently. And maybe, just maybe, their understanding of the situation is correct.
Speaking of, what is balance-sheet insolvency? It refers to a situation in which a company’s total liabilities (debts and other financial obligations) exceed its total assets (property, investments, and other sources of value). In other words, balance-sheet insolvency occurs when a company is unable to pay off its debts with its current assets. If Genesis is indeed facing a balance-sheet insolvency issue, then they may be unable to meet their financial obligations, and you may not see your money again.
If it’s a liquidity issue as Gemini believes, then the outlook is certainly more positive for customers of Gemini who want to redeem their Earn stakes. Cash-flow insolvency refers to a situation in which a company does not have enough cash on hand to meet its current financial obligations. It differs from balance-sheet insolvency in that the company has sufficient assets to cover their liabilities, but not enough liquid cash to cover their short-term financial obligations. If Genesis is facing a cash-flow insolvency issue, then they may be forced to take out a loan or other forms of financing to meet their obligations. The good news? You might see your money again, albeit it could take some time.
My takeaways?
- You’re not alone. Genesis and its parent company Digital Current Group (DCG) reportedly owe $900 million to Gemini Earn customers.²
- Fine-print aside, if Gemini really wanted to be transparent with their customers in the first place, they should have called it Genesis Earn, not Gemini Earn.
- Hope for the best, plan for the worst.
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