FTX Appeals to Court for Sale of $175M Genesis Claim Amid Bankruptcy Proceedings
Summary:
FTX, the now-insolvent cryptocurrency exchange, has sought court approval to sell its $175 million claim against bankrupt digital finance firm Genesis Global Capital. The claim is scaled down from an initial $3.9 billion lawsuit. The mutually agreed smaller sum is aimed at avoiding prolonged, costly litigation, as the possible recovery amount remains unpredictable. Objections to the claim sale can be made until February 15th. Other related events include the proposed Genesis Debtors’ bankruptcy reorganization plan consideration and Genesis reaching a $21 million settlement regarding Gemini Earn with the SEC.
On February 1st, FTX lodged an appeal in a Delaware judiciary to offload its $175 million lawsuit against the insolvent digital finance company, Genesis Global Capital, a claim originally issued by the now insolvent cryptocurrency market's tied hedge fund, Alameda Research. If given the green light, FTX has the option to either sell the entire claim or in smaller portions at varying instances to capitalize on the most advantageous market conditions. Current market rates value Genesis' claims at 65% of their outward value, a substantial leap from the 38% that Alameda Research's claims are currently going for. The appeal calls for endorsement of a sales technique applicable to all sales to avoid repeated application of separate appeals for each planned sale to save both cost and time. The selling price must be at least 95% of the “highest valuation quoted by one or multiple leading market brokers for general unsecured claims of GGC on a reference date” within a three-day window prior to the sale date. The proposed sale order's directive emphasized that the decisions made are in alignment with the best interests of the debtors, estates, creditors, interest holders and all other parties that hold an interest. Objections to the claim sale can be made until February 15th.FTX initially pursued to recoup $3.9 billion from Genesis in May, as stated in the bankruptcy law. The $175 million claim was mutually agreed upon by FTX and Genesis in August and was court-approved in October. All other claims against Genesis made by FTX were written off at this time. Related: FTX has planned to reimburse its customers in full but will not resume its exchange activities, as reported by a bankruptcy lawyer. Both parties rationalized the reduced sum by arguing the unpredictability of the recovery potential and that the settlement took into account the avoidance of a prolonged and expensive legal battle, the outcome of which would also be uncertain. FTX aims to sell its lawsuit against Genesis (source: Kroll). FTX saw its downfall in November 2022, once irregularities in its financial accounting were identified. Genesis, which at the time had a $175 million stake in its FTX account, confirmed that this did not hinder its market operations. Genesis, a branch of Digital Currency Group (DCG), declared bankruptcy in January 2023, triggering a protracted disagreement with the Gemini cryptocurrency exchange. Genesis oversaw the management of Gemini's earn program, which was hit when Genesis stopped withdrawals. A $21 million settlement with the United States Securities and Exchange Commission (SEC) regarding Gemini was reached by Genesis on 1st February. A court hearing is on the docket for February 14th in New York to consider the proposed Genesis Debtors’ bankruptcy reorganization plan and the inclusion of the SEC’s settlement. Magazine: In the wake of the collapse of FTX, can cryptocurrency exchanges still be trusted?
Published At
2/3/2024 5:58:58 AM
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