Genesis Global can distribute billions to creditors: judge

Genesis Global, the digital asset lender that collapsed last year, has received court approval to pay billions of dollars in cash and crypto to creditors.

According to Bloomberg, on May 17, Southern District of New York Judge Sean Lane confirmed Genesis’ Chapter 11 repayment plan, including a structure for returning crypto assets to creditors.

This decision paves the way for Genesis to return customer assets that have been locked on the platform since it paused withdrawals in November 2022.

Bankrupt crypto lender Genesis defeated a legal challenge from its corporate parent, Digital Currency Group, by getting court approval for its plan to distribute billions of dollars in digital assets and cash to creditors https://t.co/ekkzmu8mqk

— Bloomberg Crypto (@krypto) May 17, 2024

Judge Lane also rejected a legal challenge from Genesis Global’s parent company, Digital Currency Group (DCG), stating that the company did not have the legal standing to challenge the Chapter 11 plan.

As a Genesis stockholder, DCG will be the last person to be refunded under Chapter 11 rules.

Due to significant claims by creditors, Lane ruled that DCG’s equity interest in Genesis was effectively worthless, underscoring a multibillion-dollar shortfall.

The parent company had argued that the plan unfairly benefited Genesis’ creditors, to its detriment. He suggested that creditor claims should be based on crypto prices when Genesis filed for bankruptcy in January 2023.

Bitcoin (BTC) was trading at around $24,000 at the time. Today it is over $66,000.

But the judge rejected that appeal, stating that Genesis must prioritize other creditors, including federal and state financial regulators, with its $32 billion claim before distributing any funds to DCG.

Genesis is one of the few crypto lending firms affected by the severe crypto market downturn in 2022. The company stopped withdrawals in mid-November 2022 due to the liquidity crisis. He reportedly owes more than $3.5 billion to his 50 largest creditors, including his former business partner. , Gemini.

Since filing for bankruptcy, Genesis has been trying to liquidate some of its $1.6 billion assets after failing to reach a deal with DCG and Gemini.

In November 2023, the crypto lender announced that its parent company had agreed to repay over $300 million in outstanding loans by April. This proposed deal was intended to resolve a lawsuit Genesis filed in September seeking repayment of overdue loans worth about $620 million.

Although Judge Lane’s decision was a setback for DCG, it was widely supported by Genesis’ creditors. Bankrupt crypto lender estimated up to 77% could be recovered under bid from creditors who lent digital assets; this was significantly greater if DCG emerged victorious.