Genesis Global Wins Approval to Repay Creditors, Leaving Parent Company DCG Empty-Handed
Summary:
Bankrupt cryptocurrency lender, Genesis Global, has received court approval to refund about US$3 billion in cash and cryptocurrency to its creditors. This leaves its parent company, Digital Currency Group, with no bankruptcy recovery. Despite DCG’s legal challenge, Judge Sean Lane favored Genesis’s Chapter 11 repayment plan. Under this ruling, Genesis will return frozen customer assets from November 2022. The judge asserted DCG’s non-priority status as a shareholder in the repayment hierarchy, deeming its equity stake as essentially worthless, leaving them with a multibillion-dollar shortfall. Genesis now moves forward with liquidating assets after a proposed settlement fall-through with DCG and its former business partner, Gemini.
Cryptocurrency lending firm, Genesis Global, which had previously filed for bankruptcy, has been granted court approval to return approximately US$3 billion in cash and cryptocurrency to its creditors. This leaves its parent organization, Digital Currency Group (DCG), with no recovery from the bankruptcy. The decision was made by Judge Sean Lane on May 17, who approved Genesis’s Chapter 11 repayment plan. This ruling now permits Genesis to release and refund customer assets that have been frozen since the company stopped withdrawals in November 2022, due to the collapse of various influential cryptocurrency companies.
Nevertheless, Judge Lane rejected a dispute raised by DCG, which insisted that Genesis should not reimburse its creditors and customers more than the crypto assets worth in January 2023, which was when Genesis went bankrupt. Bitcoin was valued around $24,000 at that period, in contrast to over $66,700 on Friday, indicating an increase of over $42,000. Judge Lane dismissed DCG’s legal assertion, stating in his 135-page verdict that Genesis’ parent corporation did not possess the necessary legal standing to challenge the Chapter 11 plan.
Being a shareholder in Genesis, DCG is replicant in the reimbursement priority under Chapter 11 proceedings. As per Judge Lane, all funds available for distribution by Genesis have been exhausted by creditor claims, making DCG's equity stake of little value due to the massive creditor claims. Due to this, Judge Lane considered DCG's equity interest practically worthless, with a multibillion-dollar deficit.
The lending firm, Genesis, had become one of numerous cryptocurrency lending firms distressed by the severe cryptocurrency bear market of 2022. Following a liquidity crisis in mid-November 2022, the lender had filed for bankruptcy in January 2023, reportedly owing over $3.5 billion to its topmost 50 creditors, including Gemini. Since failing to reach a settlement with DCG and former business partner, Gemini, Genesis had been attempting to liquidate around $1.6 billion of its assets.
Genesis had previously mentioned in November 2023 that DCG had agreed to reimburse its outstanding loans worth $324.5 million by April 2024. This proposed agreement was designed to permit Genesis to conclude a lawsuit initiated against DCG in September, with the intention to have the company repay outstanding loans worth $620 million.
Published At
5/18/2024 10:43:06 AM
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