Genesis Global, a cryptocurrency lender, has received court approval to return approximately $3 billion in cash and cryptocurrency to its creditors. This decision means that its parent company, Digital Currency Group (DCG), will not recover any funds from the bankruptcy.
On Friday, May 17, Judge Sean Lane approved Genesis’s Chapter 11 repayment plan. This ruling paves the way for Genesis to release and return customer assets that have been frozen since the company suspended withdrawals in November 2022 due to the collapse of several major cryptocurrency firms.
Despite objections raised by DCG, arguing that Genesis should only pay its customers and creditors based on the value of the crypto assets in January 2023 when the bankruptcy was filed, Judge Lane dismissed the challenge. He stated in a 135-page ruling that DCG did not have the legal standing to contest the Chapter 11 plan.
As a shareholder in Genesis, DCG holds a lower position in the repayment hierarchy under Chapter 11 proceedings. According to Judge Lane, any available funds for distribution by Genesis will be used to fulfill creditor claims, which take priority over DCG’s equity stake.
Due to the significant creditor claims, Judge Lane deemed DCG’s equity interest essentially worthless, resulting in a multibillion-dollar deficit.
Despite capped customer claims, Judge Lane ruled that Genesis must prioritize paying various other creditors, including federal and state financial regulators, who have claimed $32 billion before allocating any funds to DCG.
Genesis is one of several cryptocurrency lending firms impacted by the cryptocurrency market downturn in 2022. The company filed for bankruptcy in January 2023 after suspending withdrawals following a liquidity crisis in mid-November 2022. It reportedly owes over $3.5 billion to its top 50 creditors, including firms like Gemini.
Genesis has been working to liquidate $1.6 billion of its assets after failing to reach settlements with DCG and its former business partner, Gemini.
In November 2023, Genesis announced that DCG had agreed to repay its outstanding loans worth $324.5 million by April 2024. The proposed agreement aimed to resolve a lawsuit filed against DCG in September, seeking repayment of overdue loans totaling around $620 million.
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