Genesis Global has received court approval to return nearly $3 billion in cash and cryptocurrencies to its creditors.
Genesis Global, a cryptocurrency lender that has filed for bankruptcy, has received consent from the court to refund almost $3 billion worth of cash and cryptocurrencies to its creditors.
Genesis Gets Court Approval
Because of this decision, the parent business, Digital Currency Group (DCG), will not be able to recover from bankruptcy itself. On Friday, May 17, Judge Sean Lane gave his approval to Genesis’s repayment plan within the Chapter 11 framework.
Since the company stopped accepting withdrawals in November 2022, following the collapse of several big cryptocurrency enterprises, the exchange has been unable to unfreeze and release customer assets.
This verdict makes it possible for the exchange to finally return customer assets. Lane, on the other hand, overruled an argument that was brought forward by DCG.
DCG contended that the exchange should pay its consumers and creditors no more than the value of the crypto assets in January 2023, which was the time when the exchange filed for bankruptcy.
Since then, the price of Bitcoin has climbed dramatically, going from approximately $24,000 at the time to over $66,700 on May 17th. Lane dismissed DCG’s legal challenge, stating in a 135-page ruling that the exchange parent company lacked the legal standing to challenge the Chapter 11 plan.
According to the Chapter 11 proceedings, DCG is a shareholder in Genesis, which places it in a lower position in the hierarchy of repayment decisions.
Lane asserts that claims from creditors, which take precedence over DCG’s equity interest, are depleting any funds available for Genesis to distribute.
As a result of the massive claims made by creditors, Lane determined that DCG’s equity holding was basically worthless, resulting in a deficit of several billions of dollars.
He denied DCG’s challenge and ruled that Genesis must prioritize paying numerous other creditors, including federal and state financial regulators, with $32 billion in claims before transferring any funds to DCG, which is the company’s equity owner.
Even with a cap on consumer claims, this remains the case. Genesis was one of the many cryptocurrency loan companies that suffered during the massive bear market for cryptocurrencies in 2022.
A liquidity issue that occurred in the middle of November 2022 caused the lender to restrict withdrawals, which led to the lender filing for bankruptcy in January 2023.
According to reports, the company owes more than $3.5 billion to its top 50 debtors, including companies like Gemini International. Genesis was unable to reach a resolution with DCG and Gemini, its former business partner.
The company has been making efforts to sell off $1.6 billion worth of its assets throughout this time. Genesis made an earlier statement in November 2023, stating that DCG has committed to repay its outstanding loans totaling 324.5 million dollars by April 2024.
In September, Genesis filed a lawsuit against DCG, seeking the company to repay late loans totaling approximately $620 million. The suggested arrangement aimed to enable Genesis to halt the action.