Genesis Bankruptcy Plan Disrupted by New Creditor Demands
- Genesis reached an “agreement in principle” with DCG and its creditors back in February, which would have seen creditors recover roughly 80% of their funds.
- A group of creditors has now moved away from that agreement, forcing Genesis to request a court appointed bankruptcy mediator.
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Troubled crypto lender Genesis Global has asked for a mediator for its bankruptcy proceedings after a group of creditors moved away from the initial agreement, parent company Digital Currency Group (DCG) said via Twitter on 25 April.
According to the announcement, a subset of Genesis creditors has decided to walk away from a preliminary restructuring agreement that was reached more than two months ago. Recently filed documents show that the company has now requested the court appoint a mediator who would look over the “amount, form, timing and other terms and conditions of DCG’s contribution to the debtors’ reorganization plan”.
Genesis reached an “agreement in principle” with DCG and its creditors on 6 February, which would have seen the company sell its trading and market-making arms as part of its restructuring efforts. Under those conditions, creditors were expected to recover around 80% of the assets they lost after the company collapsed. DCG said on Tuesday:
“While it is difficult to understand the rationale given the limited engagement from Genesis creditors since the February court filing, our understanding is that a subset of creditors have decided to walk away from the prior agreement. We do not know if the hundreds of thousands of individual creditors are aware of this development, but the latest maneuver will prolong the court process.”
The troubled crypto lender filed for Chapter 11 bankruptcy protection in the Southern District of New York back in January, revealing that it had estimated assets and liabilities between $1 billion and $10 billion. The lending arm of Genesis had halted all customer withdrawals in November 2022, shortly after the collapse of cryptocurrency exchange FTX.
- The IRS filed its claims against FTX under the “Admin Priority” classification, which could allow it to supersede the claims of other creditors in the bankruptcy case.
- The largest of the claims is against Alameda Research LLC, with the IRS claiming around $20 billion in partnership taxes and close to $400 million in payroll taxes.
Former CEO of FTX Sam Bankman-Fried leaves the Federal Court in New York after pleading not guilty, 3 January, 2022.
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- The cryptocurrency exchange is estimated to have more than 100,000 creditors, and between $500 million and $1 billion in both assets and liabilities.
- The Chapter 11 filing came less than a month after the U.S. SEC filed charges against Bittrex and its former CEO, claiming they were operating an unregistered securities exchange.
- Genesis, its parent company Digital Currency Group, the Unsecured Creditors Committee, and Gemini have all agreed to a 30-day mediation process.
- Although supportive of the process, Gemini expressed the “need for urgency” for a final resolution to be reached “as soon as possible”.