Bankrupt crypto lender Genesis Global Capital has won court approval for its plan to distribute billions of dollars in digital assets and cash to creditors, defeating a lawsuit. trial provided by parent company Digital Currency Group.
Judge Sean Lane said late Friday he would affirm Genesis’ Chapter 11 repayment plan, which includes a unique structure for returning bitcoin and other tokens to creditors. The decision clears the way for Genesis to return customer assets that have been frozen on the platform since the company suspended withdrawals in November 2022 following the collapse of other major cryptocurrency companies.
Judge Lane dismissed DCG’s lawsuit, saying in a 135-page ruling that Genesis’ parent company does not have the legal standing to challenge the Chapter 11 plan. As a shareholder of Genesis, DCG is last in line to pay off debt under Chapter 11, and Judge Lane said that any value that its bankrupt subsidiary has to distribute is absorbed by creditors who do not receive full repayment and preempt DCG.
“Given the size of the creditors’ claims, DCG as a shareholder has lost billions of dollars of money,” Judge Lane said.
DCG argues that the plan gives Genesis creditors an unaffordable windfall at their own expense. The parent company said creditor claims should be set based on cryptocurrency prices at the time its subsidiary filed for bankruptcy in early 2023. Bitcoin was trading around $24,000 at the time, down from more than $66,700 on Friday.
DCG can appeal Judge Lane’s decision.
Genesis estimates that lenders who lent it digital assets could recover up to 77% under its offer, and significantly less if DCG prevails. The failed lender’s proposal received widespread support from its creditors, including clients of Gemini Earn, a lending program it ran with Gemini Trust Co, owned by billionaire Winklevoss brothers.
Judge Lane also said he would approve the decision. settlement with New York Attorney General Letitia James, who sued Genesis over the Earn program. The settlement is structured so that assets that might otherwise go to government agencies will instead be returned to former Earn customers.
A bankruptcy judge previously approved a separate settlement with the U.S. Securities and Exchange Commission that ended another Earn complaint that has since been dismissed.
The case is Genesis Global Holdco, LLC, 23-10063, U.S. Bankruptcy Court, Southern District of New York (Manhattan).