Genesis To Repay Creditors Billions

Genesis will reimburse creditors up to 77% following the court’s approval of the Chapter 11 plan.

TakeAway Points:

  • Genesis Global Capital’s Chapter 11 repayment plan was accepted, enabling creditors to receive billions in cash and digital assets.
  • If DCG’s legal appeal had been successful, creditors would have received much less than the maximum 77% recovery.
  • Settlements with the SEC and the Attorney General of New York guarantee that assets go back to former Earn clients rather than state agencies.

Acceptance of Genesis Global Capital’s Repayment Plan

Genesis Global Capital, a bankrupt cryptocurrency lender, has been granted court approval for its Chapter 11 repayment plan, which intends to disburse billions of dollars in cash and digital assets to creditors. This ruling follows the failure of its corporate parent, Digital Currency Group (DCG), to mount a judicial challenge. Genesis is now able to restore client assets that had been frozen since November 2022 after Judge Sean Lane approved the arrangement late on Friday. The plan represents a big improvement for the struggling company because it contains a special mechanism for paying creditors back with Bitcoin and other tokens.

According to Judge Lane’s 135-page decision, DCG did not have the legal standing to contest the Chapter 11 plan because it was Genesis’s equity holder. He stressed that DCG is the creditor that has the least amount of outstanding debt and that they are absorbing the value that could be distributed. 

“Given the size of the creditor claims, DCG is out of money as an equity holder by billions of dollars,” Lane said.

Effect on Debtors

According to Genesis, under the authorised proposal, creditors who lent it digital assets could recoup as much as 77% of their investment. Compared to what would have been achievable if DCG’s challenge had been successful, this is a significant recovery. A large number of Genesis’s debtors, including those who have benefited from the Winklevoss brothers’ joint lending venture, Gemini Earn, have endorsed the plan.

DCG has argued that the plan unfairly rewards creditors of Genesis at the expense of the business, and that the value of cryptocurrencies at the time of Genesis’s early 2023 bankruptcy filing should be used to evaluate creditor claims. Bitcoin was priced at about $24,000 at the moment, down from about $66,700 on Friday.

Judge Lane’s judgement permits Genesis to move forward with its repayment plan in spite of these arguments, while DCG still has the right to file an appeal.

Legal Advancements in the Regulation of Cryptocurrencies

The Financial Innovation and Technology for the 21st Century Act (FIT21), a law that might have a big impact on the regulatory environment for digital assets, is about to go to a vote in the U.S. House of Representatives. A group of prominent figures in the sector, including Coinbase, Kraken, and Andreessen Horowitz, are in favour of the measure, which would establish the Commodities Futures Trading Commission (CFTC) as the principal regulator of digital assets. It also aims to demarcate the Securities and Exchange Commission (SEC) and the Consumer Financial Protection Agency (CFTC) in terms of regulations.

The bill includes provisions for consumer protections, such as rules around the custody of customer assets and their treatment in bankruptcy, and aims to set up further safeguards against risky behavior. 

“By passing this legislation, we can accelerate the growth of blockchain technology and digital assets, fostering financial inclusion and protecting national security,” the coalition stated in a letter to House leaders.

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