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Thursday, June 13, 2024

Court Approves Genesis Global's $3 Billion Payout Plan –

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Key takeaways:

  • Genesis Global, a bankrupt crypto lender, has obtained court permission to reimburse its creditors with almost $3 billion in cash and crypto.
  • Judge Lane rejected DCG’s legal appeal, finding that Genesis’s parent company lacked the necessary legal standing to dispute the Chapter 11 plan.

Genesis Global, a bankrupt crypto lender, has obtained court permission to reimburse its creditors with almost $3 billion in cash and crypto. Due to this ruling, Digital Currency Group (DCG), the parent firm, will not be able to emerge from bankruptcy.

On Friday, May 17, Judge Sean Lane approved Genesis’ Chapter 11 repayment plan. The decision allows Genesis to unlock and refund customer assets that were locked up after it stopped accepting withdrawals in November 2022 due to the failure of other significant crypto companies.

Though DCG objected, claiming Genesis should only pay its creditors and consumers the amount of the crypto assets when Genesis filed for bankruptcy in January 2023, Lane rejected DCG’s argument.

In a 135-page ruling, Lane rejected DCG’s legal appeal, finding that Genesis’s parent company lacked the necessary legal standing to dispute the Chapter 11 plan.

DCG is a Genesis stakeholder and is ranked lower in the repayment hierarchy under Chapter 11 proceedings. Lane contends that creditor claims are consuming any funds that Genesis may have available for distribution and that these claims take precedence over DCG’s equity holding.

Lane declared DCG’s ownership investment almost worthless, creating a multibillion-dollar deficit due to the massive creditor demands.

He rejected DCG’s challenge, stating that Genesis must pay many other creditors, including state and federal financial regulators, $32 billion in claims before releasing any money to DCG, its equity owner, even with capped customer claims.

The significant 2022 crypto bear market impacts several loan companies, including Genesis. Following a liquidity issue in mid-November 2022, the lender suspended withdrawals and filed for bankruptcy in January 2023. According to reports, the company owes its top 50 creditors, which include companies like Gemini, more than $3.5 billion.

Genesis has been trying to sell off $1.6 billion worth of its holdings since it could not agree with DCG and Gemini, its previous business partners.

Genesis reported in November 2023 that DCG has committed to repaying its $324.5 million in outstanding loans by April 2024. The proposed agreement was intended to enable Genesis to settle a lawsuit that it had filed against DCG in September, demanding repayment of past-due debts totaling approximately $620 million.

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