Judge Sean Lane approved Genesis Global’s Chapter 11 plan on Friday, enabling the bankrupt crypto lender to repay creditors approximately $3 billion in crypto and cash. This ruling allows Genesis to finally return frozen assets to customers, with withdrawals halted since November 2022 following the collapse of other major crypto firms.
Bloomberg reported that Judge Lane dismissed Digital Currency Group’s (DCG) legal challenge, stating that Genesis’ parent company lacked the authority to contest the Chapter 11 plan. As an equity holder, DCG is last in line for repayment, with creditors prioritized and not receiving full repayment. DCG may appeal the decision.
Bitcoin Boom Sparks Dispute Between Genesis and DCG
The surge in crypto prices since Genesis’s bankruptcy filing has led to a dispute between Genesis and its parent company, DCG, over who benefits from the windfall. Bitcoin has risen from around $21,000 in January 2023 to $67,000 today. Genesis attorney Sean O’Neal argued against DCG’s claim that customers could be paid in full based on lower crypto prices in January 2023.
Judge Lane noted that “DCG is out of the money as an equity holder by billions of dollars,” emphasizing that creditors’ claims take precedence.
Bitcoin Stability Crucial for Genesis to Meet Creditors’ Claims
Genesis expects to fulfill claims from at least 77% of its customers, contingent on Bitcoin’s value remaining stable. However, the firm faces additional obligations to state and federal regulators totaling $32 billion. Most creditors, including participants in the Gemini Earn lending program operated with Gemini Trust Co., approved the bankruptcy plan.
Genesis aims to return crypto to customers wherever possible but lacks enough crypto to fully repay all debts. In February, Genesis received approval to sell its Grayscale Bitcoin Trust (GBTC) shares, valued at over $1.3 billion, as part of its repayment efforts.
