Bankrupt crypto lender Genesis allowed to return billions of tokens and cash to creditors, meaning parent company DCG is ‘out of money’

Bankrupt crypto lender Genesis Global Capital wins court approval for plan to distribute billions of dollars in digital assets and cash to creditors, defeating a legal case physical. challenge brought by its parent company Digital Currency Group.

Judge Sean Lane said late Friday that he would confirm Genesis’ Chapter 11 repayment plan, which includes a unique structure to return Bitcoin and other tokens to creditors. The decision clears the way for Genesis to return customer assets that have been frozen on the platform since the company suspended withdrawals in November 2022 following the collapse of other major crypto firms.

Judge Lane dismissed DCG’s legal challenge, saying in a 135-page ruling that Genesis’ parent company lacked legal standing to challenge the Chapter 11 plan. As Genesis’s equity owner, DCG was the last to be repaid in Chapter 11 and Judge Lane said whatever value its bankrupt subsidiary had to distribute was being appropriated by creditors, who were not being fully repaid enough and stand before DCG.

“Given the scale of the creditor claims, DCG has lost billions of dollars as an equity owner,” Judge Lane said.

DCG argued that the scheme gave Genesis creditors an unacceptable profit given its costs. The parent company said creditor claims should be made based on the cryptocurrency’s price position at the time its subsidiary filed for bankruptcy in early 2023. At that time, Bitcoin was trading trading around $24,000, compared with more than $66,700 on Friday.

DCG can appeal Judge Lane’s decision.

Genesis has estimated creditors who lent it digital assets could recover up to 77% under its proposal, and even significantly less if DCG prevails. The bankruptcy lender’s proposal received broad support from creditors, which include customers of Gemini Earn, a lending program it runs jointly with Gemini Trust Co.

Judge Lane also said he would grant a related request handle with New York Attorney General Letitia James, who sued Genesis over the Earn program. The settlement is structured so that assets that could have gone to the state agency will instead be returned to Earn’s former customers.

The bankruptcy judge previously approved a separate settlement with the U.S. Securities and Exchange Commission that ended another complaint about the Earn program, which has since been terminated.

The case is Genesis Global Holdco, LLC, 23-10063, United States Bankruptcy Court, Southern District of New York (Manhattan).

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