Judge Lane stated that creditor claims take priority over DCG’s equity stake. All the money that Genesis Global has to distribute is running out.
Genesis Global, a bankrupt bitcoin lender, has received court approval to reimburse its creditors for $3 billion. This covers both fiat money and crypto, Digital Currency Group (DCG), its parent business, will not get anything. DCG won’t be able to emerge from bankruptcy.
On Friday, May 17, Judge Sean Lane gave his approval to Genesis’s Chapter 11 repayment plan. Genesis can unfreeze and return client assets as a result of this choice. Genesis locked up the assets when it stopped withdrawals in November 2022. The stop came after some significant bitcoin companies failed.
Judge Lane, but, overruled DCG’s objection. DCG contended that Genesis needs to reimburse clients and lenders according to the crypto assets’ January 2023 valuation. Bitcoin was trading at about $24,000 at that time. As of May 17, the price of Bitcoin has increased to almost $66,700.
Lane rejected DCG’s challenge, claiming the parent company of Genesis had the necessary legal standing to contest the Chapter 11 plan. His 135-page ruling went into detail about this.
Within the Chapter 11 repayment system, DCG is a junior shareholder in Genesis. Judge Lane stated that DCG’s equality stake is subordinate to creditor claims. As a result, these creditor claims are depleting any remaining cash for distribution.
Lane determined that DCG’s equality investment had no real value owing to massive creditor claims. A multibillion-dollar deficit exists.
Genesis Global Financial Struggles and Legal Battles
He rejected DCG’s objection, holding that Genesis had to give other creditors priority despite limiting customer claims. Among them are state and federal financial authorities, which have $32 billion in claims. Only after fulfilling these responsibilities will funds go to DCG, the company’s equity owner.
The 2022 crypto lending market affects many large companies, including Genesis. Following the suspension of withdrawals in November 2022 due to a liquidity crisis, the lender filed for bankruptcy in January 2023. According to reports, the company owes over $3.5 billion to its top 50 creditors, including Gemini.
Genesis has been trying to sell off $1.6 billion of its holdings. This follows its failed agreements with DCG and Gemini, its previous partner.
Genesis declared in November 2023 that DCG had committed to paying back its $324.5 million in loans by April 2024. The proposed agreement sought to settle a lawsuit that DCG and Genesis had filed in September. The lawsuit demanded $620 million in past-due loan repayments.
