Genesis, the bankrupt crypto lender that collapsed following the failure of the Terra/luna ecosystem and Three Arrows Capital, has received court approval for its bankruptcy plan.
U.S. Bankruptcy Judge Sean Lane overruled objections from Genesis owner Digital Currency Group (DCG), the Genesis Crypto Creditors Ad Hoc Group, and the Office of the United States Trustee.
The approved plan will return nearly $3 billion in cash and assets to creditors. DCG had argued that claims should be valued in U.S. dollars at the time of the bankruptcy filing in January 2023, avoiding nearly a year and a half of gains in the crypto sector. However, Judge Lane dismissed this complaint, stating, “DCG has objected to a plan in which it has no economic stake. The record here clearly establishes that there is not sufficient value in the Debtors’ estates to provide DCG a recovery as equity holder after unsecured creditors are paid.”
The plan involves a multi-step process that allocates assets to creditors based on claim denomination and values these assets for distribution purposes. Creditors owed cryptocurrency will be treated differently than those owed U.S. dollars.
Judge Lane noted that due to the rise in digital asset prices since the resolution, creditors with claims denominated in U.S. dollars are expected to receive 100% of their loan balance, deferring payment of post-petition interest. In contrast, creditors with claims in cryptocurrency will bear the shortfall in funds.
While DCG may appeal the ruling, it is unclear what legal justification they might have given the substantial shortfall in assets.
Gemini Earn to begin reimbursements
Following the ruling, the exchange owned by the Winklevoss twins called the decision a “welcome decision” and clarified that it does not impact the global settlement among Gemini, Genesis, and other creditors previously approved by the Bankruptcy Court.
As part of the settlement related to Gemini Earn, creditors will start receiving the assets owed to them by the beginning of the month. Roughly 97% of owed funds will be initially repaid through in-kind reimbursements. This means that customers who deposited one bitcoin into Gemini Earn will receive that bitcoin back, rather than the U.S. dollar value of the token at a specific date.
This approach differs from FTX’s bankruptcy response, which plans to reimburse customers based on the dollar value of their claims at the time of FTX’s bankruptcy filing.
