The cryptocurrency lending company Genesis Global, which shocked everyone with its bankruptcy in 2022, has received court approval to distribute billions of dollars in cryptocurrency to its creditors. This approval follows a similar announcement made by the FTX exchange earlier this month, marking Genesis’s second major debt repayment plan.
Court Approval of Genesis’s Repayment Plan
Judge Sean Lane approved Genesis’s Chapter 11 repayment plan on May 17, which involves paying creditors in Bitcoin (BTC) and altcoins instead of US dollars. This decision allows Genesis to start returning frozen customer assets since November 2022, following the collapse of several major cryptocurrency companies.
The approval of Genesis’s repayment plan has been a setback for its parent company, Digital Currency Group (DCG), which recently faced legal challenges. Judge Lane rejected DCG’s objections to the court and stated that as an equity holder, DCG lacked legal grounds to contest the Chapter 11 plan. The objections were based on the concern that Genesis’s assets would be absorbed by creditors with higher priority than DCG. Judge Lane did not accept these objections, stating, “Given the magnitude of creditors’ claims, DCG remains outside the process as a multi-billion dollar equity holder.”
According to Genesis’s proposal, creditors who previously lent their cryptocurrency could recover up to 77% of their funds, which is significantly more than they would receive if DCG were successful. The plan received strong support from creditors, including customers of the Gemini Earn program, a lending initiative run in partnership with the Winklevoss brothers’ Gemini Trust.
Judge Lane also indicated that he would approve a settlement with New York Attorney General Letitia James, who had sued Genesis due to the Gemini Earn program. This settlement will ensure that the assets are returned to former Gemini Earn customers instead of going to state authorities. Additionally, a separate agreement with the U.S. Securities and Exchange Commission (SEC) regarding the defunct Gemini Earn program was also approved by the bankruptcy judge.
Future Path for Genesis
The court’s approval of the Chapter 11 repayment plan allows Genesis to progress in returning frozen assets to its creditors. This is seen as a significant step in resolving the company’s bankruptcy proceedings and providing some relief to its creditors.
The company’s focus now is on implementing the repayment plan and ensuring creditors receive the promised assets, raising questions about potential selling pressure on the cryptocurrency market.
