In a pivotal development for the crypto industry, Genesis Global Capital, a once-prominent crypto lender, has secured court approval to commence its $3 billion repayment plan to creditors.
The decision, handed down by Judge Sean Lane of the US Bankruptcy Court, Southern District of New York, marks a significant step forward in resolving the company’s financial woes.
TLDR
- Genesis Global Capital, a bankrupt crypto lender, received court approval for its $3 billion repayment plan to creditors.
- The plan allows Genesis to return around 77% of the value of customer deposits, which were frozen since November 2022 after the collapse of FTX and other crypto firms.
- Digital Currency Group (DCG), Genesis’ parent company, will not receive any payout from the bankruptcy proceedings as it ranks lower in the repayment hierarchy.
- The surge in crypto prices since Genesis’ bankruptcy filing in January 2023 sparked a legal battle between Genesis and DCG over who gets the windfall.
- Genesis anticipates being able to fulfill claims from at least 77% of its customers, contingent on Bitcoin’s value remaining stable.
Genesis, which functioned as a crypto lending platform, found itself in dire straits following the spectacular collapse of FTX and its trading arm Alameda Research in November 2022.
The ripple effects of this event, coupled with the insolvency of the crypto hedge fund Three Arrows Capital, dealt a severe blow to Genesis’ financial stability, ultimately leading to its bankruptcy filing in January 2023.
Under the approved repayment plan, Genesis aims to return approximately 77% of the value of customer deposits, which were frozen in the aftermath of the FTX debacle.
This decision comes as a relief to countless investors and creditors who had their assets locked on the platform since November 2022, unable to access their funds.
However, not all parties involved will benefit from the court’s ruling. Digital Currency Group (DCG), the parent company of Genesis, will not receive any payout from the bankruptcy proceedings.
Judge Lane’s ruling explicitly states that DCG ranks as a junior creditor, effectively barring the company from recovering any value from the repayment fund, as it stands last in the repayment hierarchy.
GENESIS TO RETURN $3B IN CUSTOMER ASSETS UNDER THE FINALIZED BANKRUPTCY PLAN
– Genesis has secured court approval to return $3 billion in cash and crypto to creditors. This represents about 77% of customer claims.
– However, the parent company, Digital Currency Group (DCG) will… https://t.co/KajXR3IUzd pic.twitter.com/HtLoa5fvHg
— BSCN (@BSCNews) May 20, 2024
The surge in cryptocurrency prices since Genesis’ bankruptcy filing in January 2023 has further complicated matters. Bitcoin, for instance, has skyrocketed from around $21,000 in January 2023 to approximately $67,000 today.
This dramatic price appreciation has sparked a legal battle between Genesis and DCG over who should rightfully benefit from the windfall.
DCG had argued that customer claims should be capped at the value of cryptocurrencies as of January 2023, potentially allowing for full repayment to customers and a potential recovery for DCG.
However, Judge Lane dismissed DCG’s petition, stating that the company lacked the authority to contest the Chapter 11 plan, as it stands as an equity holder of Genesis, and creditors take precedence in the repayment hierarchy.
Despite the legal challenges, Genesis anticipates being able to fulfill claims from at least 77% of its customers, contingent on Bitcoin’s value remaining stable.
This prospect offers a glimmer of hope for those who had their funds locked on the platform, although it is worth noting that Genesis faces additional obligations to state and federal regulators, further complicating the repayment process.
The court’s approval of Genesis’ repayment plan represents a significant step towards resolving the company’s financial turmoil and providing some relief to creditors who had their assets frozen.
However, the legal battles between Genesis and DCG, fueled by the surge in cryptocurrency prices, underscore the complex nature of navigating the crypto landscape, particularly in the aftermath of high-profile collapses and insolvencies.
