Bankrupt crypto lender Genesis Global has been approved by a bankruptcy court to return approximately $3 billion in cash and cryptocurrency to its customers.
Significantly, the ruling leaves Genesis’ parent company, Digital Currency Group (DCG), without any recovery from the bankruptcy.
DCG Sidelined in Genesis Chapter 11 Plan
In a May 17 court filing, bankruptcy Judge Sean Lane approved the Chapter 11 liquidation plan for the failed crypto lender Genesis Global. Judge Lane stated that the plan’s Distribution Principles represent a compromise. US dollar creditors will receive near-term distributions funded partly by monetizing certain digital assets, and digital asset creditors will receive “in-kind” distributions to the maximum extent possible.
Additionally, Judge Lane ruled that DCG lacked the legal standing to challenge the Chapter 11 plan. The judge ruled that DCG was last in line for repayment because it is an equity holder. Besides that, the Court pointed out that Genesis’ value is being distributed to its creditors, who would not be fully repaid and have priority over DCG.
Read more: Who Is Barry Silbert, Founder of Digital Currency Group (DCG)?
“The Court finds that the limitations on DCG’s rights as the equity holder are inherently sensible and reasonable. The
Plan is a liquidating plan with the goal of maximizing recoveries to unsecured creditors who were allegedly harmed by DCG’s conduct,” Judge Lane wrote.
Nonetheless, DCG may file an appeal to overturn the approval.
Judge Lane also approved a related settlement with New York Attorney General Letitia James, who sued Genesis over its Earn program. This settlement ensures the return of assets to former Earn customers instead of them going to state authorities.
“Indeed, the NYAG Settlement Agreement provides the fastest process for distributions to be made to creditors,” Judge Lane remarked.
Indeed, the Court’s decision enables Genesis to return customer assets frozen since November 2022. The DCG-owned company was one of several cryptocurrency lending firms that collapsed in 2022 and filed for bankruptcy in January 2023. The lender reportedly owes over $3 billion to its top 50 creditors, including notable firms like crypto exchange Gemini.
Read more: Top Crypto Bankruptcies: What You Need To Know
The bankruptcy proceedings have involved major asset liquidations, including the sale of 36 million Grayscale Bitcoin Trust (GBTC) shares worth over $1.65 billion earlier this year. Meanwhile, its former operations have attracted significant regulatory attention from the US SEC and other regulators.
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