Genesis Global secures court approval for $3 billion payout
Bankrupt cryptocurrency lender Genesis Global has received court approval to return approximately $3 billion in cash and cryptocurrency to creditors. Due to this decision, the parent company, Digital Currency Group (DCG), will not be able to recover from bankruptcy.
Judge Sean Lane approved Genesis’ Chapter 11 repayment plan on Friday, May 17. The ruling clears the way for Genesis to lift the freeze and return customer assets that have been locked up since the company suspended withdrawals in November 2022 following the collapse of several major cryptocurrency companies.
But Lane dismissed an objection filed by DCG, which argued that Genesis should pay customers and creditors more than the value of its cryptocurrency assets in January 2023, when Genesis filed for bankruptcy. Since then, the price of Bitcoin (BTC) has risen significantly from around $24,000 at the time to over $66,700 on May 17.
In his 135-page ruling, Lane dismissed DCG’s legal challenge, noting that Genesis’ parent company lacked legal standing to challenge the Chapter 11 plan.
As a shareholder of Genesis, DCG occupies a junior position in the redemption hierarchy under the Chapter 11 proceedings. According to Lane, any funds Genesis has available for distribution are being depleted by creditor claims that have higher priority than DCG’s equity.
Because of the massive creditor claims, Lane deemed DCG’s stake essentially worthless and had a shortfall of billions of dollars.
Related: Digital currency group’s first quarter revenue rises 51% despite GBTC outflow
He dismissed DCG’s objections and said that even if customer claims were limited, Genesis would first have to pay $32 billion in claims to numerous other creditors, including federal and state financial regulators, before distributing the funds to equity owner DCG. The ruling was made.
Genesis is one of several cryptocurrency lending companies affected by the massive cryptocurrency bear market of 2022. The lender filed for bankruptcy in January 2023 after halting withdrawals due to a liquidity crisis in mid-November 2022. The company reportedly owes up to more than $3.5 billion. 50 creditors, including companies such as Gemini.
Genesis has been trying to liquidate $1.6 billion in assets after failing to reach an agreement with DCG and former business partner Gemini.
Genesis previously announced in November 2023 that DCG had agreed to pay $324.5 million in loans by April 2024. The proposed deal was aimed at allowing the company to repay about $620 million in delinquent loans, according to a lawsuit Genesis filed against DCG in September. .
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