A New York bankruptcy judge has given the nod to a settlement agreement between the defunct exchange FTX and bankrupt crypto lender Genesis Global Capital (GGC).
Following the approval, FTX’s hedge fund, Alameda Research, is set to receive $175 million from the affiliate of Digital Currency Group, the struggling crypto empire whose lending unit filed for bankruptcy in January.
The approval was handed down by the United States Bankruptcy Court for the Southern District of New York on Oct. 11. The court document outlines the go-ahead for Genesis to officially proceed with the terms of the settlement agreement, allowing the stipulated payment to FTX.
Further, Judge Sean Lane of the New York bankruptcy court dropped several claims made by FTX debtors against Genesis. This includes a number of withdrawn claims: three by FTX Trading, six by Alameda Research, and another six by West Realm Shires Services, representing FTX US.
Interestingly, the agreed-upon settlement of $175 million is a substantial reduction from the initial claims made by FTX debtors. Earlier in May 2023, they had collectively asserted claims nearing $3.9 billion. These included a hefty sum of around $1.8 billion that Alameda allegedly loaned to GGC and another $1.6 billion that Genesis debtors were believed to have withdrawn from FTX, among other assets.
Genesis had earlier voiced its opinion on the settlement, deeming it “fair and equitable.” The company believes that the resolution would prevent them from being ensnared in lengthy and uncertain litigation. However, the sentiment was not shared by all, as FTX creditors criticized the agreement and implored the Official Committee of Unsecured Creditors to challenge the deal.
The settlement proposal had seen further complications with an “ad hoc” group of creditors lambasting FTX’s attempts to reclaim loans. The group labeled FTX’s maneuvers to retrieve funds from what it referred to as its “criminal enterprise” as “unconscionable”. The group further critiqued FTX’s strategy to lay claims of billions against Genesis, likening it to “throwing spaghetti against the wall to see what sticks.”
Though the identity of this “ad hoc” group remains concealed, they previously claimed that their members are collectively owed an amount totaling $2.4 billion by GGC, making up a majority of each class of claims.
This was not the first instance of opposition to the ongoing financial procedures. Gemini, along with other creditors, has voiced their disagreement with the DCG deal in the past, calling for Genesis to lose its exclusive rights to propose a wind-up plan. Adding another layer to the controversy, in July, Gemini initiated a lawsuit against DCG, accusing Genesis of “fraud”. In response, DCG dismissed these allegations as “defamatory” and labeled them a mere “publicity stunt”.
