Bankrupt crypto lender Genesis Global Capital has won court approval for its plan to distribute billions of dollars in digital assets and cash to creditors, beating a court. challenge provided by its parent company Digital Currency Group.
Judge Sean Lane said Friday evening that he would uphold Genesis’ Chapter 11 repayment plan, which includes a unique structure for returning 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 companies.
Judge Lane rejected DCG’s legal challenge, saying in a 135-page ruling that Genesis’ parent company lacked the legal standing to challenge the Chapter 11 plan. As a shareholder of Genesis, DCG is the last to be repaid in Chapter 11 and Judge Lane said the value its bankrupt subsidiary must distribute is being absorbed by creditors, who are not being fully repaid, and is outstripping DCG.
“Given the magnitude of the creditors’ claims, DCG is out of the money as a shareholder for billions of dollars,” Judge Lane said.
DCG argued that the plan gives Genesis’ creditors an impermissible windfall at its expense. The parent company said creditors’ claims should be based on the crypto price situation at the time its subsidiary filed for bankruptcy in early 2023. At the time, Bitcoin was trading around $24,000, against more than 66,700 dollars on Friday.
DCG may appeal Judge Lane’s decision.
Genesis estimated that creditors who lent it digital assets could recover up to 77% under its proposal, and much less if DCG had won its case. The bankrupt lender’s proposal received broad support from its creditors, which include clients of Gemini Earn, a lending program it operated jointly with the billionaire Winklevoss brothers’ Gemini Trust Co..
Judge Lane also said he would approve a related ruling regulation with New York Attorney General Letitia James suing Genesis over the Earn program. The settlement is structured so that assets that might otherwise have gone to state authorities are returned to Earn’s former clients.
The bankruptcy judge previously approved a separate settlement with the U.S. Securities and Exchange Commission, ending another complaint regarding the Earn program, which has since ended.
This is Genesis Global Holdco, LLC, 23-10063, US Bankruptcy Court, Southern District of New York (Manhattan).
