Genesis Global gets court approval to distribute billions to creditors, rejects DCG challenge

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As an analyst with a background in finance and experience in the cryptocurrency industry, I believe this decision by Judge Lane is a significant step forward for Genesis Global and its creditors. The court’s approval of the repayment plan provides much-needed clarity and certainty to the situation, allowing Genesis to begin returning assets to its customers.

Last year, Genesis Global, a company specializing in lending digital assets, obtained court consent to distribute huge sums in both cash and cryptocurrency to their creditor group.

In simpler terms, Judge Sean Lane from the Southern District of New York approved Genesis’ debt restructuring plan on May 17th, as reported by Bloomberg. This plan outlines how cryptocurrencies will be distributed back to creditors.

This choice opens up a path for Genesis to release the frozen customer assets that have been held on their platform since they halted withdrawals in November 2022.

A bankrupt crypto lending company, Genesis, received court authorization to distribute approximately $Billions in digital assets and cash to its creditors, successfully overcoming a lawsuit instigated by its corporate parent, Digital Currency Group.

— Bloomberg Crypto (@crypto) May 17, 2024

In their legal challenge, Digital Currency Group (DCG), the parent company of Genesis Global, was denied standing by Judge Lane due to insufficient legal grounds.

As a Genesis equity holder, DCG will be the last to be repaid under Chapter 11 rules.

Based on the significant debts owed to creditors, Judge Lane determined that DCG’s ownership stake in Genesis holds little value, revealing a massive financial deficit of billions of dollars.

The larger corporation contended that the proposal favored Genesis’ creditors over its own interests. It proposed basing creditor compensation on the cryptocurrency values at the time of Genesis’ bankruptcy filing in January 2023.

Bitcoin (BTC) was trading at around $24,000 at the time. Today, it’s over $66,000.

The judge overruled our argument, pointing out that Genesis had to attend to other creditors first, such as federal and state financial regulators, who held claims totaling $32 billion before considering any distribution of funds to DCG.

In the aftermath of the harsh crypto market slump in late 2022, Genesis, a crypto lending platform among several others, encountered a liquidity predicament that led to a suspension of customer withdrawals around mid-November. Reports suggest that Genesis holds debts exceeding $3.5 billion towards its top 50 creditors, one of which is its previous business associate, Gemini.

After declaring bankruptcy, Genesis has been working to sell off approximately $1.6 billion in assets as an alternative measure following unsuccessful negotiations with DCG and Gemini for a settlement.

In November 2023, the crypto lending firm disclosed that its parent company intended to pay back a debt exceeding $300 million by April. This planned settlement was designed to address a lawsuit initiated by Genesis in September, claiming overdue loans amounting to approximately $620 million.

In contrast to the disappointment felt by DCG following Judge Lane’s ruling, Genesis’ creditors have expressed widespread approval for the outcome. The bankrupt crypto lender projected that creditors holding digital assets might potentially recoup up to 77%, which surpasses the expected recovery rate had DCG emerged victorious in the case.

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2024-05-18 18:32