Failed Crypto Lender Genesis to Disburse $3B to Creditors in Bankruptcy Case

CryptoNews.com

2024-05-19 20:52:20

Shalini Nagarajan

Last updated:

May 20, 2024 00:52 EDT | 1 min read

Judge Sean Lane greenlit Genesis Global’s Chapter 11 plan on Friday, allowing the defunct crypto lender to repay creditors roughly $3b in crypto and cash.

In a win for customers, the judge’s decision paves the way for Genesis to return frozen assets finally. Withdrawals have been halted on the platform since Nov. 2022, following the downfall of other major crypto firms.

Bloomberg reported that Judge Lane dismissed Digital Currency Group’s (DCG) legal challenge, stating that Genesis’ parent company lacked the authority to contest the Chapter 11 plan. As an equity holder of Genesis, DCG stands last in line for repayment, according to Judge Lane. The judge noted that creditors are prioritized ahead of DCG and are not receiving full repayment.

Genesis’ parent company, DCG, might challenge Judge Lane’s decision in court.

Bitcoin Boom Triggers Legal Battle as Genesis Clashes with DCG Over Windfall

A surge in crypto prices since Genesis’s bankruptcy filing has sparked a fight between the lender and its parent company, DCG. Their disagreement centers on who gets the windfall, with Bitcoin jumping from around $21,000 in Jan. 2023 to $67,000 today.

On Friday, Genesis attorney Sean O’Neal disagreed with DCG’s claim that customers could receive payment “in full” considering the lower crypto prices observed in Jan. 2023.

“Given the size of the creditor claims, DCG is out of the money as an equity holder by billions of dollars,” Judge Lane said.

Bitcoin Stability Key to Genesis Fulfilling Creditors’ Claims in Bankruptcy

Genesis anticipates being able to fulfill claims from a minimum of 77% of its customers. This is contingent on Bitcoin’s value remaining stable. However, it faces even more obligations to state and federal regulators for $32b.

Most creditors who were owed money approved the lender’s bankruptcy plan. This involves participants in Gemini Earn. Genesis operated this lending program with Gemini Trust Co., which is owned by the Winklevoss twins.

Genesis is prioritizing returning crypto to customers wherever possible. However, it lacks enough crypto to fully repay everyone it owes.

In February, Genesis received approval to sell its Grayscale Bitcoin Trust (GBTC) shares valued at more than $1.3b, as part of efforts to repay customers.

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