within three (3) business days of termination of the mediation, the Debtors shall publicly disclose the terms of the last offers extended by each of the Mediation Parties, respectively.”[Fn. 1]

Say what!?

Whoever heard of such a thing—a requirement that the “last offers” of the mediating parties be publicly disclosed?

And this requirement is in a “consensual” mediation order entered in the Genesis Global Holdco, LLC, bankruptcy.[Fn. 2]

Context

Here’s the context.[Fn. 3]

Genesis Global Holdco, LLC, (“Debtor”) describes its business as providing “lending and borrowing services for digital assets and fiat currency primarily to and from institutional and high net worth individual customers.”

Debtor files its voluntary bankruptcy for this declared purpose: “to maximize value for creditors” and “restructure” Debtor’s balance sheet, which includes “approximately $5.1 billion of total liabilities.”

Debtor describes the reason for its financial problems as the “tremendous dislocation” in the digital assets industry, including:

  • the collapse, in May 2022, of LUNA and TerraUSD;
  • liquidation proceedings initiated shortly thereafter for the digital asset hedge fund Three Arrows Capital Ltd.;
  • bankruptcy filings by Celsius Network LLC and Voyager Digital Holdings, Inc., in July 2022; and
  • more recent bankruptcy filings by FTX Trading Ltd. and Alameda Research Ltd.

Such drastic market shifts have decreased investor confidence in the digital asset markets. And that, in turn, has adversely and severely impaired Debtor’s business.

In particular, as the FTX situation unfolded, Debtor experienced unprecedented withdrawals, leading Debtor to pause all lending and borrowing on November 16, 2022.

Then, on January 19, 2023, Debtor files its voluntary Chapter 11 bankruptcy Petition.

Negotiations & Mediation Request[Fn. 4]

Debtor says it has been in extensive negotiations with its creditors, since November 2022, toward reaching a value-maximizing solution to Debtor’s financial problems.

Such efforts result in an agreement in principle with various creditors and creditor groups, memorialized in a Restructuring Term Sheet, establishing a framework for continued negotiations.

In such efforts, Debtor determines that the assistance of a mediator is needed in negotiationing the amount, form, timing and other terms and conditions of financial contribution to Debtors’ reorganization plan.

Debtor files its motion requesting mediation, contending that:

  • mediation may help the parties get past the impediments to a consensual bankruptcy plan;
  • a mediation session should be scheduled immediately, with a proposed termination date of thirty days thereafter;
  • the appointment as mediator of a sitting bankruptcy judge from the Southern District of New York would be appropriate; and
  • each of the proposed mediation parties will participate in the mediation.

The result is an agreed mediation order containing the public disclosure of final mediation positions noted above.

Conclusion

It’s in the context described above that the proposed mediation parties agree that their final mediation proposals are to be made public.

That’s amazing!

It would be interesting to hear about the discussions and arguments that lead up to and result in such an arrangement.