Cryptocurrencies

Genesis Global, the bankrupt cryptocurrency lender, has received approval from

Genesis Global, a bankrupt cryptocurrency lender, has received court approval to return about $3 billion in cash and cryptocurrencies to its creditors. This decision leaves its parent company, Digital Currency Group (DCG), without recovering from bankruptcy.

Judge Sean Lane approved Genesis’ Chapter 11 payment plan on Friday, May 17. The ruling paves the way for Genesis to unfreeze and return customer assets that have been withheld since the company halted withdrawals in November 2022 following the demise of several prominent cryptocurrency companies.

However, in the ruling, Judge Lin overruled the objection raised by DCG, which argued that Genesis should pay its customers and creditors no more than the value of its cryptocurrency assets in January 2023, when Genesis filed for bankruptcy. Bitcoin (BTC) was trading at about $24,000 at the time, compared to more than $66,700 on Friday, indicating a significant increase of more than $42,000.

Judge Lin dismissed DCG’s legal challenge, stating in a 135-page ruling that Genesis’ parent company lacked legal standing to challenge the Chapter 11 plan.

As a shareholder of Genesis, DCG occupies a junior position in the payout hierarchy under the Chapter 11 proceedings. According to Judge Lin, any funds available for distribution by Genesis are exhausted by creditor claims, which have priority over DCG’s stock interest.

Given the massive creditor claims, Judge Lin deemed DCG’s equity stake essentially worthless, with a shortfall in the billions of dollars.

Related: The cryptocurrency group’s first-quarter revenue jumped 51% despite GBTC outflows

He rejected DCG’s objection, ruling that even with capped customer claims, Genesis must prioritize paying several other creditors, including federal and international financial regulators with $32 billion in claims, before distributing any money to DCG, the owner of its shares.

Genesis is one of many cryptocurrency lending companies that were affected by the massive cryptocurrency bear market in 2022. The lender filed for bankruptcy in January 2023 after suspending withdrawals following a liquidity crisis in mid-November 2022. The company reportedly owes more than $3.5 billion to its largest shareholders. 50 creditors, including companies like Gemini.

Genesis is liquidating $1.6 billion of its assets after failing to reach settlements with DCG and its former business partner, Gemini.

Genesis previously said in November 2023 that DCG had agreed to repay its $324.5 million in outstanding loans by April 2024. The proposed deal is intended to allow Genesis to end a lawsuit filed against DCG in September that sought to require the company to repay about $620 million in delinquent loans. . .

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