Genesis wins court nod to return $3 billion to creditors

Bankrupt
crypto
lending
company
Genesis
Global
Holdco
received
court
permission
to
return
approximately
$3
billion
in
cash
and
crypto
assets
to
its
creditors
as
part
of
its
bankruptcy
liquidation
process
on
Friday.
US
Bankruptcy
Judge
Sean
Lane

made
the
decision.

In
addition,
Judge
Sean
Lane
rejected
Digital
Currency
Group’s
(DCG),
attempt
to
challenge
the
distribution
plan
for
the
debtors’
assets
in
the
bankruptcy
case.

DCG
objected
to
the
distribution
plan
as
it
believes
repayments
should
be
capped
at
the
crypto
asset
values
of
January
2023
(at
the
time
of
Genesis’
bankruptcy
filing).
Since
then,
the
value
of
cryptos
like
Bitcoin
has
surged,
with
Bitcoin’s
price
jumping
from
around
$21,000
to
a
current
value
of
nearly
$67,000.

The
firm
also
claimed
that
the
plan
provides
too
much
return
to
creditors
at
DCG’s
expense.
Essentially,
DCG
feels
that
it
is
unfairly
disadvantaged
by
how
the
returns
are
allocated.

However,
DCG’s
arguments
failed.
Judge
Sean
Lane
ruled
that,
as
an
equity
holder,
DCG’s
financial
interest
isn’t
directly
impacted
by
how
the
assets
are
distributed.
Equity
holders
only
get
paid
after
all
creditors
are
satisfied.

Additionally,
given
the
insolvency
and
the
massive
creditor
claims,
DCG
won’t
receive
any
distribution
under
this
plan.

The
total
amount
owed
to
creditors
is
billions
of
dollars
higher
than
the
debtors’
available
assets.
These
claims
have
priority
over
equity
holders
like
DCG,
meaning
they
get
paid
first
in
line
during
bankruptcy.

The
ruling
also
considered
the
substantial
$32
billion
in
claims
from
federal
and
state
financial
regulators,
prioritizing
them
over
DCG’s
equity
stake.

Genesis
had
previously
estimated
that
it
could
pay
up
to
77%
of
the
value
of
customer
claims,
a
figure
subject
to
future
market
fluctuations.

Hit
hard
by
the
collapse
of
Three
Arrows
Capital
(3AC)
and
FTX,
Genesis
–
along
with
other
lending
platforms
–
faced
liquidity
issues
during
the
2022
market
downturn.
This
ultimately
led
the
company
to

file
for
Chapter
11
bankruptcy
in
January
2023.

Genesis’
creditors
include
several
prominent
names,
such
as
Gemini,
Bybit’s
Mirama,
Decentraland,
and
VanEck.

Adding
to
its
troubles,
Genesis
Global
Capital
faced
a
legal
lawsuit
from
the
US
Securities
and
Exchange
Commission
(SEC).
The
SEC
accused
Genesis
and
Gemini
of
selling
unregistered
securities
through
Gemini
Earn.
The
company
reached
a

$21
million
settlement
with
the
SEC
in
March
this
year.