Bankrupt Genesis Global received court approval to return approximately $3 billion in cash and cryptocurrency to its creditors. The latest ruling leaves Digital Currency Group (DCG), Genesis’s parent company, without any recovery from bankruptcy.
DCG Loses Recovery Chance in Genesis Bankruptcy
On Friday, May 17, U.S. Bankruptcy Judge Sean Lane approved Genesis’s Chapter 11 repayment plan. This marks the second big announcement about paying off debts, following a similar plan revealed by FTX earlier this month. The decision allows Genesis to return customer assets frozen since November 2022, when major crypto firms collapsed and halted withdrawals.
However, Judge Lane dismissed DCG’s objection that Genesis should pay its creditors and customers no more than the value of the crypto assets in January 2023, when the firm filed for bankruptcy. Bitcoin’s price has risen significantly since then, from about $24,000 to over $66,700 on May 17. Lane dismissed DCG’s challenge, stating in a 135-page ruling that Genesis’ parent company lacked legal standing to contest the plan.
As a stakeholder in Genesis, DCG occupies a subordinate position in the repayment order during Chapter 11 proceedings. Lane states that any funds ready for distribution by Genesis are being utilized to fulfill creditor claims prioritized over DCG’s ownership stake.
Given the significant creditor claims, the judge deemed DCG’s equity interest essentially valueless, with a multibillion-dollar shortfall. He rejected DCG’s complaint, saying Genesis must pay many creditors first. This includes government regulators owed $32 billion, before giving any money to DCG.
Genesis Bankruptcy and Asset Sale
Genesis, a crypto lending company, faced trouble due to the crypto market crash in 2022. It declared bankruptcy in January 2023 after stopping withdrawals during a crisis in November 2022. It owes over $3.5 billion to its main creditors, such as Gemini. Genesis is selling $1.6 billion because it couldn’t make deals with DCG and its old partner, Gemini.
In November 2023, Genesis said DCG would repay its $324.5 million loans by April 2024. This deal was supposed to end a lawsuit Genesis filed in September. They wanted DCG to repay about $620 million in overdue loans. Other struggling cryptocurrency firms and their creditors are likely to monitor this ruling closely. It could have implications for the industry’s current and future bankruptcy cases.
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