Genesis Global, the digital asset lender that went bankrupt last year, has won court approval to pay billions in cash and cryptocurrencies to creditors.
according to BloombergOn May 17, Southern District of New York Judge Shawn Lin confirmed Genesis' Chapter 11 repayment plan, including the structure for returning crypto assets to creditors.
This decision paves the way for Genesis to return customer assets locked on the platform since it paused withdrawals in November 2022.
Judge Lin also rejected a legal challenge from Genesis Global's parent company, Digital Currency Group (DCG), stating that the company lacks legal standing to object to the Chapter 11 plan.
As a holder of Genesis shares, DCG will be the last to be paid under Chapter 11 rules.
Due to large creditor claims, Lane ruled DCG's stake in Genesis stock effectively worthless, highlighting a multibillion-dollar deficit.
The parent company argued that the plan unfairly benefited Genesis' creditors to its detriment. It suggested that creditors' claims would be based on cryptocurrency prices when Genesis filed for bankruptcy in January 2023.
Bitcoin (BTC) was trading at around $24,000 at the time. Today, its value exceeds $66,000.
However, the judge rejected that objection, stating that Genesis must prioritize other creditors, including federal and international financial regulators, with claims worth $32 billion before distributing any funds to DCG.
Genesis is one of several cryptocurrency lending companies affected by the sharp downturn in the cryptocurrency market in 2022. The company halted withdrawals due to a liquidity crunch in mid-November 2022. It reportedly owes more than $3.5 billion to its 50 largest creditors, including Including her former business partner. , twin.
Since declaring bankruptcy, Genesis has been trying to liquidate some of its assets worth $1.6 billion after failing to reach settlements with DCG and Gemini.
In November 2023, the cryptocurrency lender announced that its parent company had agreed to repay an outstanding loan of over $300 million by April. The proposed deal aims to resolve a lawsuit filed by Genesis in September, seeking repayment of delinquent loans worth approximately $620 million.
While Judge Lane's decision represents a setback for DCG, Genesis' creditors have given him broad support. The bankrupt cryptocurrency lender estimated that creditors who lent digital assets could recover up to 77% under its proposal, much more than if DCG had prevailed.