FTX is seeking court approval to sell $175 million of its Genesis claims during bankruptcy proceedings.

FTX has begun significant legal action by filing a motion in a Delaware court to sell its $175 million claim against Genesis Global Capital. The move comes after Genesis Global Capital declared bankruptcy, directly impacting FTX and its hedge fund Alameda Research. The claims, originally filed by Alameda Research, form part of FTX’s broader strategy to seek financial recovery following the collapse. FTX’s move to sell claims in whole or in part and potentially across a variety of circumstances aims to optimize market conditions to maximize sales proceeds.

Genesis’ claims are currently trading at 65% of par, which is significantly higher than the 38% valuation under Alameda Research’s claims. FTX’s motion outlines proposed sales procedures designed to streamline the process. The sale price must be at least 95% of the highest asking price quoted by a major market maker for Genesis Global Capital’s general unsecured claims within a specified period of time around the sale date. This strategic decision highlights FTX’s intention to alleviate the financial complexities and delays typically associated with the sale of such claims, and highlights the rationale behind the agreement that it is in the best interests of all parties involved, including debtors, creditors and other stakeholders.

The background to this motion is FTX’s initial efforts to recover $3.9 billion from Genesis under the provisions of the Bankruptcy Code. That amount was later reduced to $175 million in a settlement reached between the two entities in August 2023 and approved by the court in October 2020. Same year. The settlement effectively extinguishes other claims brought by FTX against Genesis. Both parties cited the unpredictable nature of potential recoveries and the desire to avoid lengthy and costly litigation as key reasons for the decline in claim amounts.

This development is part of a larger story that led to the collapse of FTX due to accounting irregularities in November 2022, sending shockwaves through cryptocurrency markets. Genesis Global Capital, which had $175 million tied up in its FTX account at the time, insisted this did not affect its market-making activities. However, the situation has become more complicated with Genesis’ own bankruptcy filing in January 2023 and the resulting legal entanglements, particularly with the Gemini cryptocurrency exchange through its Gemini Earn program. Genesis’ recent $21 million settlement with the SEC over matters related to Gemini Earn is an important element of its ongoing bankruptcy reorganization efforts.

A court hearing scheduled for Feb. 14 in New York will be a key moment considering whether Genesis’ proposed bankruptcy reorganization plan includes the SEC settlement. The hearing represents an important step in the unfolding legal drama surrounding the bankruptcy of Genesis Global Capital and its broader implications for the cryptocurrency industry.

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