Given the massive debt and numerous creditor claims, there is no likelihood of any assets remaining for equity holders like DCG.

Bankrupt crypto lending firm Genesis Global Holdco received court approval on Friday to return approximately $3 billion in cash and crypto assets to its creditors as part of bankruptcy liquidation proceedings. The decision was made by U.S. Bankruptcy Judge Sean Lane.

Additionally, Judge Sean Lane rejected Digital Currency Group’s (DCG) attempt to challenge the debtor’s plan for distribution of assets in the bankruptcy case.

DCG has disputed the distribution plan because it believes the repayment should be limited to the value of crypto assets as of January 2023, when Genesis files for bankruptcy. Since then, the value of cryptocurrencies like Bitcoin has surged, with the price of Bitcoin jumping from about $21,000 to nearly $67,000.

The company also claims that the plan provides excessive returns to creditors at the expense of DCG. Essentially, DCG argues that it was unfairly disadvantaged by the way the returns were allocated.

However, DCG's arguments failed to convince the court. Judge Sean Lane ruled that as an equity holder, DCG's financial interest would not be directly affected by how the assets were distributed. Equity holders would only be paid after all creditors' claims were satisfied.

In addition, given Genesis Global Holdco's insolvency and the huge claims of creditors, DCG, as an equity holder, will not receive any asset distribution under the liquidation plan.

Creditors, whose combined claims exceed billions of dollars in assets available to debtor Genesis Global Holdco, are seeking priority over DCG equity holders in the bankruptcy proceedings, meaning they will be paid first in a liquidation.

The ruling also specifically prioritizes up to $32 billion in claims filed by federal and state financial regulators, allowing them to be considered ahead of DCG’s equity stake.

Genesis had previously expected it would be able to pay out up to 77% of the value of customer claims, but that percentage could be affected by future market fluctuations.

Hit hard by the collapse of Three Arrows Capital (3AC) and FTX, Genesis, like other lending platforms, suffered liquidity issues during the market downturn in 2022. This ultimately led to the company filing for Chapter 11 bankruptcy protection in January 2023.

Genesis’ list of creditors includes some well-known entities such as Gemini, Bybit’s Mirama, Decentraland, and VanEck.

To make matters worse, Genesis Global Capital also encountered legal action filed by the U.S. Securities and Exchange Commission (SEC). The SEC claimed that the products offered by Genesis and Gemini through Gemini Earn involved the sale of unregistered securities. In response, the company reached a $21 million settlement with the SEC in March this year.

Conclusion:

The bankruptcy of Genesis Global Holdco demonstrates the high-risk nature of the cryptocurrency market and the urgent need for regulation. Although the company was allowed to return a huge amount of assets to creditors, equity holders such as DCG may get nothing. This incident reminds the industry that it must strengthen risk management and compliance.

As regulation increases and the market evolves, cryptocurrency businesses will need to continue to adapt and ensure sustainable and responsible growth in order to gain wider trust and realize their potential to transform the financial world. #Genesis #债权人 #还债 #索赔