A bankruptcy court has granted approval for Genesis Global, a bankrupt cryptocurrency lender, to distribute approximately $3 billion in cash and cryptocurrency to its creditors. However, this decision leaves its parent company, Digital Currency Group (DCG), without any recovery from the bankruptcy.
Judge Sean Lane sanctioned Genesis’s Chapter 11 repayment plan on Friday, May 17. The ruling paves the way for Genesis to release and return customer assets that have been held since November 2022 when the company ceased withdrawals following the collapse of several major cryptocurrency firms.
Despite objections from DCG, which argued that Genesis should only repay customers and creditors based on the value of the crypto assets in January 2023 when Genesis filed for bankruptcy, Judge Lane overruled. Since then, the price of Bitcoin has surged from around $24,000 to over $66,700 on May 17.
Lane dismissed DCG’s challenge, stating in a 135-page ruling that DCG lacked the legal standing to contest the Chapter 11 plan. As a shareholder in Genesis, DCG holds a subordinate position in the repayment hierarchy under Chapter 11 proceedings. Lane emphasized that creditor claims take precedence over DCG’s equity stake, rendering DCG’s interest essentially valueless due to the extensive creditor claims.
Despite the capped customer claims, Lane emphasized that Genesis must prioritize paying various other creditors, including federal and state financial regulators with claims totaling $32 billion, before distributing any funds to DCG.
Genesis, like many cryptocurrency lending firms, was adversely affected by the massive crypto bear market of 2022. It filed for bankruptcy in January 2023 after suspending withdrawals following a liquidity crisis in mid-November 2022. The company 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.
In November 2023, Genesis announced that DCG had agreed to repay its outstanding $324.5 million in loans by April 2024. The proposed arrangement aimed to settle a lawsuit filed against DCG in September, seeking repayment of overdue loans worth approximately $620 million.
May 2024, Cryptoniteuae
