Genesis Global, the bankrupt cryptocurrency lender secured a court approval in order to distribute billions of dollars in digital assets to the creditors. This is the second major announcement of debt repayment to creditors after FTX announced a similar plan earlier this month.

Genesis’s Debt Repayment Plan

On Friday, May 17, Judge Sean Lane confirmed the Chapter repayment plan by Genesis that includes a unique structure of returning Bitcoin and other tokens to the creditors. It’s interesting to know that while the FTX repayment plan involves returning creditors in USD, this plan from Genesis actually involves the repayments in Bitcoin and crypto.

The decision paves the way for Genesis to return customer assets that have been frozen since the firm paused withdrawals in November 2022, following the collapse of several major crypto companies.

This comes as a blow to Genesis parent Digital Currency Group (DCG) which has been posing legal challenges recently. Judge Lane dismissed DCG’s legal challenge, stating in a 135-page ruling that Genesis’ parent company lacked the legal standing to contest the Chapter 11 plan.

As an equity holder in Genesis, DCG is last in line for repayment under Chapter 11. Judge Lane noted that any value Genesis has to distribute is being absorbed by creditors, who are not being fully repaid and have priority over DCG. “Given the size of the creditor claims, DCG is out of the money as an equity holder by billions of dollars,” Judge Lane said.

Creditor to Get Back 77% of the Funds Stuck

Genesis has estimated that creditors who lent it digital assets could recover up to 77% under its proposal, significantly more than if DCG had succeeded. The bankrupt lender’s proposal received strong support from its creditors, including customers of Gemini Earn, a lending program run in partnership with the Winklevoss brothers’ Gemini Trust Co.

Judge Lane also indicated he would approve a related settlement with New York Attorney General Letitia James, who sued Genesis over the Earn program. This settlement ensures that assets that could have gone to state authorities will instead be returned to former Earn customers.

Additionally, the bankruptcy judge previously approved a separate settlement with the US Securities and Exchange Commission, resolving another complaint regarding the now-terminated Earn program

The post Genesis Debt Repayment: Creditors Get Greater Priority Over DCG appeared first on CoinGape.

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Filed under: News - @ May 18, 2024 5:13 am