Genesis Global, a bankrupt cryptocurrency lender, has been given the green light by Judge Sean Lane to return approximately $3 billion in cash and cryptocurrency to its creditors. This decision comes at the expense of its parent company, Digital Currency Group (DCG), which will not receive any recovery from the bankruptcy.
On Friday, May 17, Judge Lane approved Genesis’s Chapter 11 repayment plan, allowing the company to unfreeze and return customer assets that had been locked up since November 2022 when the company halted withdrawals due to the collapse of several major cryptocurrency firms.
DCG objected to the plan, arguing that Genesis should only pay its customers and creditors based on the value of the crypto assets in January 2023 when Genesis filed for bankruptcy. However, Lane dismissed DCG’s objection, stating that DCG lacked the legal standing to contest the Chapter 11 plan. As a shareholder in Genesis, DCG’s equity stake is subordinate to creditor claims.
Lane determined that DCG’s equity interest in Genesis holds no value due to the significant creditor claims, resulting in a multibillion-dollar shortfall. He ruled that Genesis must prioritize paying its numerous other creditors, including federal and state financial regulators with $32 billion in claims, before distributing any funds to DCG.
Genesis is one of several cryptocurrency lending firms that suffered from the crypto bear market of 2022. The company filed for bankruptcy in January 2023 after suspending withdrawals during a liquidity crisis in November 2022. It reportedly owes over $3.5 billion to its top 50 creditors, including firms like Gemini.
Genesis has been working to liquidate $1.6 billion of its assets after failing to reach settlements with DCG and its former business partner, Gemini. In November 2023, Genesis announced that DCG had agreed to repay its outstanding $324.5 million in loans by April 2024, aiming to resolve a lawsuit filed against DCG in September that sought repayment of overdue loans worth around $620 million.