Genesis, a cryptocurrency lending institution that filed for bankruptcy in January 2023 after suffering a liquidity crisis caused by the fallout from Three Arrows Capital and FTX, is facing opposition from its parent company, Digital Currency Group (DCG), regarding its bankruptcy repayment plan.
According to reports from Reuters and Cointelegraph, DCG has formally submitted a motion to the court on Monday expressing its opposition to Genesis’ repayment plan. DCG argues that Genesis violates US bankruptcy laws by proposing to pay creditors amounts exceeding their legitimate claims and insists that the amount Genesis repays to customers and creditors should not exceed the value of the cryptocurrency assets at the time of Genesis’ bankruptcy filing in January 2023.
Genesis and the major creditors’ group hope to value tokens such as Bitcoin and Ethereum at prices closer to current market values in their repayment plan to reflect the increased value of digital assets during the bankruptcy process. However, DCG claims that Genesis’ current assets, valued based on the cryptocurrency asset valuation at the time of its bankruptcy on January 20, 2023, are sufficient to fully repay creditors and still have remaining assets to pay DCG.
If the proposed repayment plan is valued closer to current prices, it is expected that Genesis’ repayment amount will exceed the total claimed amount at the time of its bankruptcy filing by several hundred million dollars. DCG argues that such a plan heavily favors a group of minority creditors and violates bankruptcy laws.
According to CoinGecko data, the current price of BTC is approximately $42,925, an increase of over 90% from around $22,677 in January last year. The current price of ETH, at $2,361, has also appreciated by over 50% compared to the bankruptcy price of $1,550.
Following the failure to reach a settlement with its parent company DCG and former business partner Gemini Exchange, Genesis is liquidating its existing assets and seeking court approval to sell its approximately $1.6 billion trust assets, including nearly $1.4 billion in GBTC. The company reportedly owes over $3.5 billion to its top 50 creditors, including Gemini.
Gemini has submitted documents to the court in support of Genesis’ repayment plan, stating that the plan provides a repayment path for customers whose assets have been locked up for over 16 months.
However, it is worth noting that in the recent FTX bankruptcy case, the FTX liquidation team proposed calculating the value based on the “fair and equitable” value as of the bankruptcy date on November 11, 2022, which sparked complaints from dozens of angry creditors. The US bankruptcy judge overseeing the FTX restructuring rejected the creditors’ request to value their assets held on the platform based on current pricing, stating that US bankruptcy law is “very clear” and that valuing customer claims based on the prices at the time of bankruptcy is correct.
After reaching a settlement with the US Securities and Exchange Commission (SEC) for $21 million last week, Genesis plans to seek court approval for its repayment plan at a hearing scheduled for February 14 in New York.