June 17, 2024
1 Solar System Way, Planet Earth, USA

Genesis wins court authorization to return $3 billion to its creditors

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Bankrupt crypto lending company Genesis Global Holdco received court permission to return approximately $3 billion in cash and crypto assets to its creditors as part of its bankruptcy liquidation process on Friday. US Bankruptcy Judge Sean Lane made the decision.

Additionally, Judge Sean Lane rejected Digital Currency Group's (DCG) attempt to challenge the debtors' asset distribution plan in the bankruptcy case.

DCG opposed the distribution plan because it believes redemptions should be capped at crypto asset values ​​in January 2023 (at the time of Genesis' bankruptcy filing). Since then, the value of cryptocurrencies like Bitcoin has increased, with the price of Bitcoin jumping from around $21,000 to a current value of almost $67,000.

The company also claimed that the plan provides too much return to creditors at the expense of DCG. Essentially, DCG believes it is unfairly disadvantaged by the way returns are allocated.

However, DCG's arguments failed. Judge Sean Lane ruled that as a shareholder, DCG's financial interest is not directly affected by the way assets are distributed. Shareholders only receive their payment after all creditors are satisfied.

Furthermore, given the insolvency and huge creditor claims, DCG will not receive any distributions under this plan.

The total amount owed to creditors is billions of dollars greater than the debtors' available assets. These claims take priority over shareholders like DCG, meaning they are the first to receive payment during a bankruptcy.

The ruling also considered the substantial $32 billion in claims from federal and state financial regulators, prioritizing them over DCG's shareholding.

Genesis had previously estimated that it could pay up to 77% of the value of customer claims, a figure subject to future market fluctuations.

Hit hard by the collapse of Three Arrows Capital (3AC) and FTX, Genesis, along with other lending platforms, faced liquidity issues during the 2022 market downturn. This ultimately led the company to File for Chapter 11 Bankruptcy in January 2023.

Genesis' creditors include several prominent names, such as Gemini, Bybit's Mirama, Decentraland, and VanEck.

Compounding its problems, Genesis Global Capital faced a lawsuit from the United States Securities and Exchange Commission (SEC). The SEC accused Genesis and Gemini of selling unregistered securities through Gemini Earn. The company achieved a $21 million settlement with the SEC in March of this year.

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