FTX Moves to Sell $175M Claim Amid Genesis Bankruptcy

FTX claim affiliated with the bitcoin exchange’s hedge fund Alameda Research may be sold in whole or part.

On February 1, FTX submitted a motion to a court in Delaware to sell its claim against Genesis Global Capital, a digital financial services company that has gone bankrupt, for $175 million.

According to Alameda Research, the hedge fund affiliated with the bitcoin exchange that went bankrupt made the assertion. If the claim is granted, FTX may sell it in its entirety or in part, and at various times, to take advantage of the most favorable conditions.

Currently, FTX is selling it for 65% of its face value, which is significantly higher than the 38% that Alameda Research claims are fetching. Currently, individuals are selling claims against Genesis.

To “alleviate the cost and delay of filing a separate motion for each proposed sale,” the motion requests that a sales procedure be applied to all transactions.

“Entry of this Order is in the best interests of the Debtors and their estates, creditors, interest holders and all other parties-in-interest.”

It is required that the sale price be equal to or greater than 95% of “the highest price quoted by one or more leading market-makers for general unsecured claims of GGC on a reference date” within three days of the date of the sale.

The proposed sale order specified that interested parties could submit objections to the sale of the claim by February 15th. In May 2023, FTX made an initial attempt to recoup $3.9 billion from Genesis, as was permitted by the statute governing bankruptcy.

In August 2023, FTX and Genesis engaged in negotiations on the claim for $175 million, which was subsequently approved by the court in October of that same year.

Meanwhile, the court dismissed other claims that FTX had made against Genesis. By maintaining that the possibility of recoveries was unpredictable and that the settlement avoided lengthy and costly litigation, the outcome of which would also be unexpected, the parties supported the decision to significantly reduce the amount of money being offered.

The fall of FTX occurred in November 2022 following the discovery of discrepancies in the company’s account books. Genesis stated that having $175 million locked up in its FTX account at the time did not affect its market-making activities.

In January 2023, Genesis, a subsidiary of the Digital Currency Group, submitted a petition for bankruptcy, which sparked a protracted fight with the Gemini cryptocurrency exchange.

Genesis maintained the Gemini Earn program, which was affected when it stopped allowing withdrawals through the program. On February 1, Genesis achieved a settlement with the United States Securities and Exchange Commission involving Gemini Earn.

The settlement was for the amount of $21 million. On February 14, a court hearing will take place in New York, during which the proposed bankruptcy reorganization plan of Genesis debtors and the inclusion of the SEC settlement in the plan will be considered.