Genesis Global, a bankrupt cryptocurrency lender, has received court approval to return around $3 billion in cash and cryptocurrency to its creditors. This decision means that its parent company, Digital Currency Group (DCG), will not recover any funds from the bankruptcy.
Judge Sean Lane gave his approval to Genesis’s Chapter 11 repayment plan on May 17. This ruling paves the way for Genesis to release and return customer assets that have been locked up since the company suspended withdrawals in November 2022 due to the collapse of several major cryptocurrency firms.
Despite objections raised by DCG, Lane overruled them. DCG argued that Genesis should only pay its customers and creditors based on the value of the crypto assets in January 2023 when Genesis filed for bankruptcy. However, Lane dismissed DCG’s legal challenge, stating that DCG did not have the legal standing to contest the Chapter 11 plan.
As a shareholder in Genesis, DCG holds a lower-ranking position in the repayment hierarchy under Chapter 11 proceedings. Lane explained that any funds available for distribution by Genesis are being used up by creditor claims, which have priority over DCG’s equity stake. Due to the large creditor claims, Lane determined that DCG’s equity interest is essentially worthless, resulting in a significant shortfall.
Lane’s ruling means that Genesis must prioritize paying other creditors, including federal and state financial regulators, who have $32 billion in claims, before distributing any funds to DCG, its equity owner.
Genesis is one of several cryptocurrency lending firms that have been affected by the cryptocurrency market downturn of 2022. The company filed for bankruptcy in January 2023 after suspending withdrawals due to a liquidity crisis in November 2022. It reportedly owes over $3.5 billion to its top 50 creditors, including firms like Gemini.
Genesis has been working to liquidate $1.6 billion of its assets after failing to reach settlements with DCG and its former business partner, Gemini. In November 2023, Genesis announced that DCG had agreed to repay its outstanding $324.5 million in loans by April 2024. This proposed deal aimed to resolve a lawsuit filed against DCG in September, seeking repayment of overdue loans worth approximately $620 million.
(Source: Bankrupt cryptocurrency lender Genesis Global has secured court approval to return about $3 billion in cash and cryptocurrency to its creditors. This decision leaves its parent company, Digital Currency Group (DCG), with no recovery from the bankruptcy. Judge Sean Lane approved Genesis’s Chapter 11 repayment plan on Friday, May 17. The ruling clears the path for Genesis to unfreeze and return customer assets that have been locked up since the company halted withdrawals in November 2022 following the collapse of several major cryptocurrency firms. However, Lane overruled an objection raised by DCG, which argued that Genesis should pay its customers and creditors no more than the value of the crypto assets in January 2023, when Genesis filed for bankruptcy. The price of Bitcoin (BTC) has increased significantly since then, from around $24,000 at the time to over $66,700 on May 17. Lane dismissed DCG’s legal challenge, stating in a 135-page ruling that Genesis’ parent company lacked the legal standing to contest the Chapter 11 plan. As a shareholder in Genesis, DCG holds a junior position in the repayment hierarchy under Chapter 11 proceedings. According to Lane, any available funds for distribution by Genesis are being exhausted by creditor claims, which take priority over DCG’s equity stake. Due to the enormous creditor claims, Lane deemed DCG’s equity interest essentially valueless, with a multibillion-dollar shortfall. Related: Digital Currency Group first-quarter revenue jumps 51% despite GBTC outflows He dismissed DCG’s objection, ruling that even with capped customer claims, Genesis must prioritize paying numerous other creditors, including federal and state financial regulators, with $32 billion in claims before distributing any funds to DCG, its equity owner. Genesis is one of multiple cryptocurrency lending firms affected by the massive crypto bear market of 2022. The lender filed for bankruptcy in January 2023 after suspending withdrawals following a liquidity crisis in mid-November 2022. The firm reportedly owes more than $3.5 billion to its top 50 creditors, including firms like Gemini. Genesis has been working to liquidate $1.6 billion of its assets after failing to reach settlements with DCG and its former business partner, Gemini. Genesis previously said in November 2023 that DCG agreed to pay its outstanding $324.5 million in loans by April 2024. The proposed deal aimed to allow Genesis to end a lawsuit filed against DCG in September that sought to have the firm repay overdue loans worth around $620 million. Magazine: Unstablecoins: Depegging, bank runs and other risks loom)