Genesis Global, the bankrupt cryptocurrency lender, secured a court judgment to distribute billions of dollars worth of digital assets to creditors. Additionally, following FTX’s recent disclosure of a comparable strategy, this represents another substantial commitment to repay debts.
The Debt Repayment Plan of Genesis
Judge Sean Lane verified Genesis’ Chapter repayment plan on Friday, May 17. The plan involves a novel framework for giving back Bitcoin and other tokens to creditors. It’s interesting to note that, in contrast to the FTX repayment plan, which calls for paying creditors back in US dollars, the Genesis plan calls for making payments in Bitcoin and other cryptocurrencies.
The recent ruling presents an opportunity for Genesis to reclaim client assets, which have been inaccessible since November 2022. This is because the company ceased withdrawals following the collapse of several prominent cryptocurrency firms. Consequently, with this development, Genesis can now initiate the process of recovering blocked funds, offering hope to affected clients.
Genesis’s parent company, Digital Currency Group (DCG), has recently faced legal issues, which hurts it. In a 135-page decision, Judge Lane rejected DCG’s legal appeal, finding that Genesis’ parent company lacked the legal standing to dispute the Chapter 11 plan.
Under Chapter 11, DCG is last in line for repayment because it owns Genesis. Consequently, creditors have priority over DCG and are not being completely repaid. Therefore, they are absorbing any value Genesis has to share. Judge Lane observed, “DCG is out of the money as an equity holder by billions of dollars, given the size of the creditor claims.” This significant gap highlights the financial challenges faced by DCG. In conclusion, the repayment process under Chapter 11 favors creditors, leaving equity holders like DCG with substantial losses.
Debtor to Receive 77% of the Total Amount Unable to move
According to Genesis, under its plan, creditors who lent it digital assets might get up to 77% of their money back. This amount is significantly higher than they would have received if DCG had been successful, highlighting the plan’s benefits. Furthermore, strong support for the bankrupt lender’s proposal was shown by its creditors, including clients of Gemini Earn, a lending initiative. This initiative was managed in conjunction with the Winklevoss brothers’ Gemini Trust Co., demonstrating a collaborative effort. Additionally, Judge Lane stated he would sanction a related deal with Letitia James, the attorney general of New York. This deal, through a settlement, ensures that former Earn clients will receive the restitution of assets. These assets might have otherwise gone to state authorities, making the settlement more favorable for clients. Moreover, the bankruptcy judge previously accepted a different settlement with the US Securities and Exchange Commission. This settlement addressed another allegation related to the now-cancelled Earn programme, providing further resolution.
