Genesis Global Capital, a bankrupt crypto lender, is facing a surprising opponent in its quest for court approval on the distribution of assets to creditors: its parent company, Digital Currency Group owned by Barry Silbert.
Genesis and DCG will duke it out in a White Plains, NY, courtroom over the bankrupt subsidiary’s plan to repay creditors whose assets have been frozen on the platform since November 2022. This freeze followed the collapse of several large crypto firms.
The outcome of this duel will determine how much Genesis creditors will be repaid. If Genesis’s plan is approved, creditors stand to recover up to 77% of what they are owed, but less if DCG’s proposal wins. The creditors include high net-worth clients and customers of the lending program Genesis ran with Gemini Trust Co., owned by the Winklevoss brothers.
After Genesis filed for Chapter 11, a restructuring deal with DCG, Gemini, and major creditors fell apart, leading to the current court battle. Genesis abandoned restructuring efforts following regulatory lawsuits against the companies.
Disputed Claims
DCG, Genesis, and Gemini have denied wrongdoing but are locked in legal disputes. DCG argues that Genesis’s plan favors certain creditors unfairly, while stripping the parent company of economic and governance rights.
DCG insists that creditor claims should be valued based on crypto prices at the time of Genesis’s bankruptcy filing in early 2023, rather than current market values. This methodology is common in other crypto bankruptcies due to the volatility of digital assets.
Maintaining Value
Genesis’s plan seeks to distribute digital assets based on the prices at the time of bankruptcy filing, offering additional steps to add more value to creditors. The company aims to repay customers in the same type of tokens they initially lent to Genesis.
Judge Sean Lane will decide whether Genesis’s proposal aligns with bankruptcy laws. The trial is expected to last several days.
Contact the reporter, Jonathan Randles, in New York at jrandles5@bloomberg.net
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Michael B. Marois
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