In a significant development for former customers of Genesis Global, Judge Sean Lane has approved the crypto lender’s Chapter 11 bankruptcy plan. This decision, announced on Friday, clears the way for Genesis to repay creditors approximately $3 billion in both cryptocurrency and cash. The ruling marks a crucial step towards restoring access to assets that have been frozen since November 2022, following the collapse of several major crypto firms.
Restoration of Customer Assets
The judge’s approval signifies a victory for Genesis’s creditors, who have been unable to withdraw their funds for nearly a year. Bloomberg reports that Judge Lane dismissed a legal challenge from Digital Currency Group (DCG), Genesis’s parent company, stating that DCG lacks the authority to contest the bankruptcy plan. As an equity holder, DCG is last in line for repayment, underscoring that creditors will be prioritized and are unlikely to receive full compensation.
DCG is expected to consider challenging this decision, potentially leading to further legal proceedings.
Bitcoin Surge Sparks Dispute Between Genesis and DCG
Legal Battle Over Crypto Windfall
The recent surge in cryptocurrency prices has intensified the conflict between Genesis and DCG. Since Genesis filed for bankruptcy, Bitcoin’s price has soared from approximately $21,000 in January 2023 to around $67,000 today. This dramatic increase has led to a dispute over who should benefit from the windfall.
Genesis’s attorney, Sean O’Neal, argued against DCG’s claim that creditors could be fully repaid based on the lower Bitcoin prices in January 2023. Judge Lane highlighted that due to the substantial creditor claims, DCG, as an equity holder, is unlikely to recover its investments.
Also Read: Genesis Sues DCG (Digital Currency Group), Its Parent Company, For $600 Million
Stability of Bitcoin Crucial for Genesis’s Repayment Plan
Meeting Creditors’ Claims
Genesis aims to satisfy claims from at least 77% of its customers, but this goal depends heavily on the stability of Bitcoin’s value. In addition to its obligations to creditors, Genesis also faces significant financial liabilities to state and federal regulators, totalling $32 billion.
The bankruptcy plan has received approval from the majority of creditors, including participants in the Gemini Earn program, a lending initiative operated in collaboration with Gemini Trust Co., owned by the Winklevoss twins.
Genesis is committed to returning cryptocurrency to its customers wherever possible. However, the firm does not possess sufficient crypto assets to fully repay all its debts. In February, Genesis received permission to sell its shares in the Grayscale Bitcoin Trust (GBTC), valued at over $1.3 billion, as part of its efforts to repay creditors
Discussion about this post