Digital Currency Group (DCG), the parent firm of the bankrupt crypto lender Genesis Capital, has objected to Genesis’ bankruptcy plan, arguing that it violates the Bankruptcy Code.
DCG filed a motion on Feb. 5 objecting to the bankruptcy plan, claiming that its subsidiary, Genesis, proposed to pay its customers more than they are legally entitled to.
“DCG would support a plan that pays creditors one hundred cents on the dollar, and the estates currently have sufficient assets to do so,” the court filing reads, adding that the debtors have not proposed such a plan.
Instead, the debtors, in cooperation with Genesis’ unsecured creditors and the Genesis lenders’ “devised a cramdown plan” that pays unsecured creditors “hundreds of millions of dollars more than the full amount of their petition date claims,” DCG argued.
According to the firm, such a plan “disproportionately favors a small controlling group of creditors over others” and is “in violation of the Bankruptcy Code.” DCG added:
“It also strips DCG of other valuable economic and corporate governance rights further violating the Bankruptcy Code and demonstrating a lack of good faith. DCG cannot support such a plan, and the court should not approve it.”
Genesis has been working to liquidate $1.6 billion of its assets after failing to reach settlements with DCG and its former business partner Gemini.
Genesis is one of multiple cryptocurrency lending firms affected by the massive crypto bear market of 2022. The lender filed for bankruptcy in January 2023 after suspending withdrawals following a liquidity crisis in mid-November 2022. The firm reportedly owed more than $3.5 billion to its top 50 creditors, including firms like Gemini.
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On Jan. 31, 2024, Genesis and its affiliates said they had settled with the United States Securities and Exchange Commission (SEC) for $21 million. The Genesis legal team proposed a Feb. 14 hearing to recognize the SEC settlement as part of its bankruptcy case.
Genesis previously said in November 2023 that DCG agreed to pay its outstanding $324.5 million in loans by April 2024. The proposed deal aimed to allow Genesis to end a lawsuit filed against DCG in September that sought to have the firm repay overdue loans worth around $620 million.
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