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Genesis: Returning $3 Billion to Customers in Liquidation Plan


Genesis recently received court approval to distribute $3 billion in cash and cryptocurrency to its creditors. Digital Currency Group (DCG), the parent company of Genesis, will not receive a payout. Judge Sean Lane stated there isn’t enough value in Genesis’s estate to cover DCG as an equity holder. Even if creditor claims were valued as DCG proposed, they are out billions.

 

Bankruptcy Background and Financial Struggles

Genesis Global Holdco LLC, the holding company of Genesis, and its subsidiaries filed for Chapter 11 bankruptcy in New York in January 2023. This was due to significant losses from the collapses of Three Arrows Capital and FTX. Over $3.5 billion is owed to its top 50 creditors. In response to the filing, the market doubted customers would be fully repaid.

DCG previously argued that customer claims should be capped at the value of cryptocurrencies as of January 2023. They believed this would allow for full repayment to customers and potentially a recovery for DCG. Judge Lane noted DCG assumed $1.1 billion of Genesis’s debt from the Three Arrows Capital collapse with a 10-year promissory note. However, this illiquid obligation did not cover the losses, leading to scrutiny of DCG’s financial practices.

 

DCG and Genesis’s Credit Lines and Repayment Plan

DCG and Genesis had credit lines between them, and Genesis sued DCG over missed loan payments. In November 2023, DCG and Genesis reached a repayment plan. DCG has paid $227.3 million so far and plans to pay another $275 million by April to settle a lawsuit over $620 million in loans.

Genesis’s court-approved liquidation plan marks a significant step in resolving its bankruptcy proceedings. Customers will recover 77% of their claims, but DCG will not receive a payout. This case highlights the complexities and challenges in the crypto bankruptcy landscape.



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