Judge Sean Lane activated Genesis Global’s Chapter 11 plan on Friday, allowing the defunct cryptocurrency lender to repay creditors some $3 billion in cryptocurrencies and cash.
The judge’s decision, which is favorable to customers, clears the way for Genesis to finally return its frozen assets. The platform’s payouts have been halted since November 2022 in the wake of the collapse of other major cryptocurrency companies.
Bloomberg reported that Judge Lane dismissed Digital Currency Group ‘s (DCG) legal challenge, saying Genesis ‘ parent company lacked standing to challenge the plan under Chapter 11. According to Judge Lane, as a Genesis shareholder, DCG stands last in line for repayment. The judge noted that creditors have priority over DCG and do not receive full repayment.
Genesis’ parent company, DCG, may challenge Judge Lane’s decision in court.
Bitcoin boom sparks legal battle as Genesis clashes with DCG over windfall profits
The surge in cryptocurrency prices since Genesis’ bankruptcy has sparked a battle between the lender and its parent company, DCG. Their dispute centers on who will receive a windfall profit, after bitcoin rose from around $21,000 in January 2023 to $67,000 today.
On Friday, Genesis’ lawyer, Sean O’Neal, disagreed with DCG’s claim that customers could receive payment “in full” given the lower cryptocurrency prices seen in January 2023.
“Given the size of creditors’ claims, DCG as a shareholder is out of pocket for billions of dollars,” Judge Lane said.
Genesis expects to be able to satisfy the claims of at least 77% of its customers. This is contingent on the value of Bitcoin remaining stable. However, the company faces even greater liabilities to state and federal regulations, valued at $32 billion.
Most creditors owed money have approved the lender’s bankruptcy plan. This includes participants in Gemini Earn. Genesis operated that loan program at the Gemini Trust Co. owned by the Winklevoss twins.
Genesis prioritizes returning cryptocurrencies to customers whenever possible. However, it lacks enough cryptocurrency to fully pay off all its debts. In February, Genesis received approval to sell more than $1.3 billion worth of its Grayscale Bitcoin Trust (GBTC) shares as part of its efforts to repay customers.
