Genesis Wins Court Approval to Refund $3B in Bankruptcy Case

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As a crypto investor with some experience in the industry, I’m relieved to hear that Genesis Global Capital has secured court approval to refund $3 billion to its customers. This news comes as a significant milestone after the company’s liquidity crisis triggered by substantial exposure to Three Arrows Capital and FTX.

In a recent court ruling, Genesis Global Capital, a leading player in the cryptocurrency market specializing in trading and lending services, has been given the green light to return approximately $3 billion to its clients. This resolution comes after Genesis faced financial instability in November 2022 due to significant investments in Three Arrows Capital (3AC) and the failed crypto exchange FTX.

As a crypto investor, I’ve experienced firsthand the challenges that have beset this company for the past 20 months. The situation took a turn for the worse when they halted deposits and withdrawals on their platform. This unfortunate decision ultimately led to their filing for Chapter 11 bankruptcy protection in the United States.

US Bankruptcy Judge Sean Lane approved Genesis’s restructuring plan, marking a major development in the case.

As an analyst, I would rephrase it as follows: I propose that the company repays 77% of its debts to customers in a combination of cash and digital assets, despite facing resistance from entities such as Digital Currency Group (DCG), Genesis’s parent company, and the Crypto Creditors Ad Hoc Group.

DCG Challenges Genesis’s Restructuring Plan

The entities filed a distinct objection with the US Bankruptcy Court in Manhattan’s Southern District, aiming to lower the suggested payout proportion proposed by the independent advisers managing Genesis’ Chapter 11 case.

Genesis argued for reducing the proportion of returns given to customers, which applied to both regular customers and those utilizing the joint lending initiative between Genesis and Gemini called Gemini Earn.

As a crypto investor, I would interpret this situation as follows: The companies contended that they were entitled to receive equity dividends instead of merely returning a portion of the borrowed cryptocurrencies to their customers. This disparity led to an unfair advantage for Genesis creditors at the expense of DCG. In simpler terms, while crypto clients received back only a fraction of their lent coins, Genesis was able to enjoy the full benefits of equity dividends.

As a financial analyst, I would recommend that repayments be calculated based on the cryptocurrency prices during the declaration of bankruptcy by DCG in early 2023. Specifically, the value of Bitcoin (BTC) at that time was approximately $24,000.

US Bankruptcy Judge Rules in Favour of Genesis

Instead of “However, Judge Lane dismissed this complaint, ruling in favor of Genesis’s proposed restructuring plan,” you could say:

The judge ruled that creditors holding fiat currencies, like the US dollar, will be handled distinctly from those with claims in cryptocurrencies.

In light of the rise in value of digital assets since the decision was made, it is now expected that US dollar claimants will receive the full repayment of their loan amounts, with no requirement for them to pay back accrued interest after the filing date. On the other hand, creditors whose claims are denominated in cryptocurrency may experience a shortfall due to the current value difference between their debts and the available funds.

As a crypto investor, I’ve been following the news about Genesis closely. Unfortunately, even though they’ve received approval to return close to 80% of the funds owed to their customers, they don’t have sufficient Bitcoin (BTC) and Ethereum (Ether) reserves on hand for those who lent their crypto assets to the firm to receive their full original investment back.

Based on a detailed 135-page court filing, the company outlines its strategy for making up the remaining funds as part of its bankruptcy plan.

Court Removes DCG from Eligible Creditors

When the court rejected DCG’s objection to the bankruptcy plan, the judge determined that the company did not possess the necessary legal authority to contest the proposal. Subsequently, DCG was omitted from the list of entities entitled to receive payments.

In simpler terms, the court determined that the Debtors’ assets were not worth enough for DCG to regain any financial gain as a shareholder once unsecured debts had been settled.

Based on the magnitude of the creditor claims, DCG has been financially depleted as an equity holder to the tune of billions of dollars, despite the proposed valuation method by DCG being used in the court’s estimation.

However, the company has the option to appeal the judge’s decision in court.

A Welcomed Development

With a confirmed plan to dispense $3 billion among its customers, Gemini is prepared to initiate payouts starting in 2022 for those impacted by the Genesis liquidity crisis via its Earn platform.

OnFriday, the company welcomed the news of approval and announced plans for customer refunds, which will begin next month.

To begin with, around 97% of the overdue funds will be distributed to customers who have exhibited great patience and have been waiting for a period of two years.

The platform will repay customers in the same form of digital assets they originally transferred, guaranteeing an exact match with the initial deposit amount.

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2024-05-20 13:04