Bankrupt Crypto Lender Genesis to Repay $3 Billion to Creditors

US Bankruptcy Judge Sean Lin approved Genesis Global's Chapter 11 liquidation plan on Friday, enabling the bankrupt cryptocurrency lender to return nearly $3 billion in cash and cryptocurrencies to its creditors.

This ruling means that the parent company, Digital Currency Group (DCG), will not recover anything from the bankruptcy proceedings.

DCG left with no recovery

Judge Lin's ruling comes after overruling DCG's objection, which argued that repayment to Genesis' creditors should be capped at cryptocurrency prices as of January 2023, which is when the company declared bankruptcy. At the time, Bitcoin was worth $21,084. However, the price has since risen to around $66,900.

“We don't buy into the idea that claims are limited by the value of the petition date,” said Sean O'Neill, the attorney representing Genesis.

Judge Lane sided with Genesis, It helps Even if customer claims were capped at lower rates, the company would still be obligated to pay many other creditors.

As a minority stakeholder in Genesis under Chapter 11 proceedings, DCG finds itself at the bottom of the reimbursement hierarchy. Lin stated that the recovery process should prioritize creditor claims over equity stakes held by shareholders such as DCG.

“There are not enough assets to provide any recovery for DCG in these cases,” Lin noted, citing the multi-billion-dollar shortfall that renders DCG's equity stake worthless.

Genesis' attorney, Sean O'Neill, emphasized that the company is committed to compensating customers in cryptocurrency wherever possible, acknowledging that the digital assets available are less than the total amount owed.

Genesis bankruptcy plan

Genesis filed for bankruptcy in January 2023 after suspending withdrawals in November 2022 due to a liquidity crisis. The company owes more than $3.5 billion to its 50 largest creditors, including Gemini.

Following its filing, Genesis liquidated $1.6 billion in assets following unsuccessful settlement negotiations with DCG and its former partner Gemini.

In November 2023, Genesis announced that DCG had agreed to repay $324.5 million in loans by April 2024 to resolve a lawsuit filed in September seeking repayment of $620 million in delinquent loans.

Genesis has proposed a plan that estimates that creditors who lent digital assets could recover up to 77%, a higher rate than if DCG had won in court. The proposal has received broad support from creditors, including Gemini Earn customers.

Judge Sean Lane has since approved Genesis' bankruptcy plan and related settlement with New York Attorney General Letitia James, redirecting assets to Earn's former clients rather than state authorities. Lane also agreed to a settlement with the U.S. Securities and Exchange Commission, ending a complaint about the now-terminated Earn Program.