Digital Currency Group Challenges Genesis Settlement with NYAG Over Unfair Asset Distribution
Summary:
Venture capital firm Digital Currency Group (DCG) has lodged an objection to the settlement agreement between its bankrupt subsidiary, Genesis, and the office of the New York Attorney General (NYAG). DCG criticizes the NYAG settlement for being based on asset values at distribution time rather than at the petition date, as required by bankruptcy code. The firm further argues that the settlement unfairly allocates the leftover assets to the NYAG and unsecured creditors, thereby neglecting the rights of DCG as a secured creditor and equity owner. DCG demands that the approval of the settlement be withheld until its concerns are addressed.
On February 21, Digital Currency Group (DCG), a venture capital firm, lodged a formal opposition to the settlement met between its bankrupt subsidiary, crypto loan company Genesis, and the office of the New York Attorney General (NYAG). DCG's objection, though currently accessible only in a censored version, contends that the NYAG settlement unfairly calculates payouts to unsecured creditors based on assets' worth at the distribution time, rather than at the time of initial petition filing, as mandated in the Bankruptcy Code. The objecion comments that such a settlement practice, disregarding the bankruptcy regulations, should not be sanctioned by the court, a principle upheld by the U.S Supreme Court.
DCG also criticized the settlement for giving away any remaining value in the debtor's estates to the NYAG and unsecured creditors after satisfying the former's claims. This action, argues DCG, denies them, as a creditor and equity owner, the right to get a portion of the remaining assets under the debtor's plan, by essentially allocating the leftover assets post payment of unsettled claims from creditors. Under the said arrangement, NYAG would receive its claim payment only after the unsecured creditors are compensated. DCG, being the only equity owner in Genesis, holds the position of a secured creditor.
DCG's concern is that Genesis has failed in fulfilling its obligations to all creditors. It insists that Genesis should demonstrate its commitment in evaluating the validity of claims, exploring potential solutions, striving for the best deal for the estate, and engaging in honest negotiations to improve the estate's overall value. DCG, in a statement given to Cointelegraph, voiced a strong opposition to this "covertly arranged, last-minute distribution plan that aims at an unfair distribution of all estate value to favourite creditors who have already had their claims fully compensated".
DCG sees these anomalies as signs that debtors did not adequately consider the possibility of winning against NYAG allegations in court. The company has thus requested that the court delay the approval of the settlement until its concerns are resolved.
Somewhat paralleling the complaints lodged against the bankruptcy plan of Genesis, DCG had raised similar issues earlier. The NYAG, in October, had taken legal action against Genesis, DCG, and crypto exchange Gemini, accusing them of misleading investors via the Gemini Earn program run jointly by Genesis and Gemini. After suspending withdrawals in November 2022, Genesis declared bankruptcy in January 2023.
Published At
2/22/2024 10:47:47 PM
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