Bankrupt cryptocurrency bank Genesis Global Capital has won court approval for its plan to distribute billions of dollars in digital assets and cash to creditors, overcoming a legal ruling. challenge It was introduced by the company's parent cryptocurrency group.
Judge Sean Lin said late Friday that he will confirm Genesis' Chapter 11 repayment plan that includes a unique structure to return bitcoin and other tokens to creditors. The decision paves the way for Genesis to return customer assets that have been frozen on the platform since the company temporarily halted withdrawals in November 2022 following the collapse of other major cryptocurrency companies.
Judge Lin dismissed DCG's legal challenge, saying in a 135-page ruling that Genesis' parent company lacked legal standing to challenge the Chapter 11 plan. As a holder of Genesis shares, DCG is last in line for payouts in Chapter 11, Judge Lin said Any value that must be distributed by the bankrupt subsidiary is absorbed by creditors, who do not receive full payment, and come ahead of the DCG.
“Given the scale of the creditors’ claims, DCG is out of money as a multibillion-dollar stockholder,” Judge Lane said.
DCG argued that the plan gives Genesis' creditors a windfall at its expense. The parent company said creditors' claims should be determined based on the level of cryptocurrency prices at the time its subsidiary filed for bankruptcy in early 2023. At the time, bitcoin was trading at about $24,000, compared to more than $66,700 on Friday.
The DCG can appeal Judge Lane's decision.
Genesis estimated that creditors who lent it digital assets could recover up to 77% under its proposal, much less if DCG prevailed. The bankrupt lender's proposal received broad support from its creditors, including clients of Gemini Earn, a lending program it runs jointly with the billionaire Winklevoss brothers' Gemini Trust Co.
Judge Lane also said he would approve a related order Colony With New York Attorney General Letitia James, who sued Genesis over the EARN program. The settlement is designed so that assets that would have gone to state authorities are instead returned to Earn's former clients.
A bankruptcy judge had earlier approved a separate settlement with the SEC that ended a different complaint about Earn, which has since been terminated.
The case is Genesis Global Holdco, LLC, No. 23-10063, U.S. Bankruptcy Court, Southern District of New York (Manhattan).