Legal Victory For Genesis Global: $3B Distribution Approved By Court

The bankrupt cryptocurrency lender Genesis Global has obtained court approval to return approximately $3 billion in cash and cryptocurrency to its creditors. This decision leaves its parent company, Digital Currency Group (DCG), with no recovery from the bankruptcy proceedings.

On Friday, May 17, Judge Sean Lane sanctioned Genesis’s Chapter 11 repayment plan, facilitating the release of customer assets that have been frozen since Nov 2022. This freeze followed the collapse of several major cryptocurrency firms, prompting Genesis to suspend withdrawals.

Judge Lane, however, rejected DCG’s objection. DCG had argued that Genesis should only pay its customers and creditors the value of their crypto assets from Jan 2023, when Genesis declared bankruptcy. At that time, Bitcoin (BTC) was worth about $24,000. On Friday, Bitcoin was over $66,700, showing a big rise of more than $42,000.

In a 135-page ruling, he concluded that DCG did not have the legal right to challenge the Chapter 11 plan, thereby allowing the repayment process to proceed without modification.

As a Genesis shareholder, DCG occupies a subordinate rank in the repayment order during Chapter 11 proceedings. Judge Lane has stated that creditor claims, which precede DCG’s equity interest, consume all distributable funds from Genesis.

Given the many creditor claims, Judge Lane has determined that DCG’s equity interest is worthless, and the company faces a several billion-dollar deficit.

Judge Rules Genesis Must Pay

He rejected DCG’s objection and ruled that Genesis must pay many other creditors, like federal and state financial regulators, $32 billion in claims. Only after that can they distribute any money to DCG, their equity owner.

Genesis is one of several cryptocurrency lending companies hit hard by the significant crypto bear market in 2022. The lender filed for bankruptcy in January 2023 after halting withdrawals due to a liquidity crisis in mid-Nov 2022. The firm reportedly owed over $3.5 billion to its top 50 creditors, including firms like Gemini.

To resolve its financial obligations, Genesis has been working to liquidate $1.6 billion in assets after failing to negotiate settlements with DCG and its former partner, Gemini.

In Nov 2023, Genesis announced that DCG had agreed to repay its outstanding $324.5 million in loans by April 2024. This proposed settlement was intended to resolve a lawsuit filed against DCG in September, which demanded repayment of overdue loans totaling approximately $620 million.

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