A US bankruptcy court has just given the green light to cryptocurrency lender Genesis Global’s liquidation plan to return approximately $3 billion to its creditors.
In a memorandum decision, Judge Sean Lane says Genesis’ Chapter 11 liquidation plan is reasonable and proposed in good faith.
“The court finds that the plan should be confirmed because it meets all the requirements of applicable law. Broadly speaking, the Plan provides for all of the Debtors’ restricted assets to be paid to the unsecured creditors.”
But the decision is not good for Genesis parent company Digital Currency Group (DCG), which argued in a motion filed in February that the bankruptcy plan will give a larger payout to certain creditors and leave shareholders with nothing.
In his decision, Lane says DCG objected to a plan in which it has no economic interest. He says there are “not nearly enough assets” for the venture capital firm to recover from bankruptcy.
“In rejecting DCG’s objection, the Court ultimately concludes that the objection is results-oriented and based on DCG’s lack of reinstatement as a shareholder under the Plan. But as discussed below, there are not nearly enough assets to achieve any recovery for DCG in these cases.
It is clear from the file that there is not sufficient value in the debtors’ estates to offer DCG a reinstatement as a shareholder after the unsecured creditors have been paid. In short: the debtors are insolvent. Given the size of the creditor claims, DCG as a shareholder is out of the money by billions of dollars, even if the court has valued the creditor claims using the method DCG proposes.”
Genesis customers’ funds have been frozen since November 2022, when the now-bankrupt crypto lender halted withdrawals due to liquidity issues caused by the collapse of crypto hedge fund Three Arrows Capital.
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Generated image: Midjourney