Crypto Lender Genesis In Bankruptcy To Pay Creditors $3 Billion

U.S. Bankruptcy Judge Sean Lane on Friday approved Genesis Global’s Chapter 11 liquidation plan, allowing the bankrupt cryptocurrency lender to return approximately $3 billion in cash and cryptocurrency to its creditors.

This ruling means that its parent company, Digital Currency Group (DCG), will not recover anything from the bankruptcy proceedings.

DCG left without recovery

Judge Lane’s ruling comes after he dismissed an objection by DCG, which argued that repayment to Genesis’ creditors should be limited to cryptocurrency prices starting in January 2023, when the company filed for bankruptcy . At the time, bitcoin was valued at $21,084. However, the price has since risen to $66,900.

“We don’t accept the idea that claims are limited to the value as of the date of the petition,” said Sean O’Neal, an attorney representing Genesis.

Judge Lane sided with Genesis, stating that even if customer claims were limited to lower prices, the company would still be obligated to pay many other creditors.

As Genesis’ junior stakeholder under the Chapter 11 proceeding, DCG is at the bottom of the repayment hierarchy. Lane stated that the recovery process must prioritize the claims of creditors over the equity stakes held by shareholders such as DCG.

“There are not enough assets to provide any recovery to DCG in these cases,” Lane noted, pointing to the multibillion-dollar shortfall that makes DCG’s stake worthless.

Genesis attorney Sean O’Neal confirmed that the company is committed to refunding customers in cryptocurrency whenever possible, acknowledging that available digital assets fall short of the full amount owed.

Genesis Bankruptcy Plan

Genesis filed for bankruptcy in January 2023 after suspending withdrawals in November 2022 due to a liquidity crisis. The company owes more than $3.5 billion to its top 50 creditors, including Gemini.

Following its filing, Genesis has been liquidating $1.6 billion in assets following failed settlement negotiations with DCG and former partner Gemini.

In November 2023, Genesis announced that DCG agreed to repay $324.5 million in loans by April 2024 to settle a lawsuit filed in September seeking repayment of $620 million in overdue loans.

Genesis proposed a plan that estimated creditors who lent digital assets could recover up to 77%, a higher rate than if DCG had won in court. This proposal received broad support from creditors, including customers of the Gemini Earn program.

Judge Sean Lane has since approved Genesis’ bankruptcy plan and a related settlement with New York Attorney General Letitia James, redirecting assets to Earn’s former clients instead of state authorities. Lane also approved a settlement with the U.S. Securities and Exchange Commission, ending a complaint over the now-defunct Earn program.

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