As an experienced financial analyst, I’m closely following the developments in the Genesis Global bankruptcy case and its plan to distribute digital assets to creditors. This latest announcement marks a significant step forward for Genesis, allowing it to return frozen customer assets and make repayments in Bitcoin and crypto.
Genesis Global, a bankrupt cryptocurrency lender, has received court approval for distributing substantial amounts of digital assets to its creditors. This marks the second instance of debt repayment plans announced by a crypto firm this month, following FTX’s similar announcement.
Genesis’s Debt Repayment Plan
On Friday, May 17, Judge Sean Lane endorsed Genesis’ Chapter 11 reorganization plan, which features a distinctive arrangement for returning Bitcoin and other digital tokens to the creditors instead of USD. This sets Genesis apart from FTX, whose creditor repayments are made in traditional currency.
This choice opens up a path for Genesis to restore access to client funds that were put on hold since the company halted withdrawals in November 2022, following the demise of some prominent crypto businesses.
As a crypto investor, I was disappointed to learn that the legal challenge brought forth by Digital Currency Group (DCG), the parent company of Genesis, has been dismissed by Judge Lane. In a lengthy 135-page ruling, the judge determined that DCG did not possess the necessary legal standing to contest the Chapter 11 reorganization plan for Genesis.
As a researcher studying the Genesis bankruptcy case, I’ve discovered that as an equity holder, Digital Currency Group (DCG) is at the back of the line when it comes to repayment during this Chapter 11 process. The judge overseeing the case, Judge Lane, explained that any assets Genesis holds are currently being used to pay off creditors, who themselves are not receiving their full repayments and have priority over DCG. In simpler terms, given the immense size of the creditor claims, DCG’s equity investment in Genesis is likely to be worthless, with potential losses numbering in billions of dollars.
Creditor to Get Back 77% of the Funds Stuck
According to Genesis’ estimation, creditors who extended digital loans to the company could potentially recoup as much as 77% of their investments under its proposed plan. This figure is markedly higher than what they might have recovered if DCG (Digital Currency Group) had been successful. The bankrupt lender’s proposal garnered robust approval from its creditors, including those involved with Gemini Earn – a lending initiative in collaboration with the Winklevoss brothers’ Gemini Trust Company.
As a crypto investor, I can tell you that Judge Lane’s decision also includes his approval of a related settlement with New York Attorney General Letitia James. In simpler terms, this means that instead of those assets going to the state authorities, they will be returned to former Earn program customers.
The bankruptcy court has also given its approval to a distinct settlement agreement between the company and the SEC (Securities and Exchange Commission) over another dispute concerning the discontinued Earn initiative.
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2024-05-18 08:19