Digital Currency Group (DCG) has lodged an objection against the settlement between its bankrupt subsidiary Genesis and the New York Attorney General’s office, citing concerns related to the Bankruptcy Code.
DCG opposes this subversive arrangement, devised at the last minute and in secret, which aims to redistribute the entire value of the estate to preferred creditors who would have already received the full value of their claims.
DCG
Objection to the settlement in favor of unsecured creditors
On February 21, venture capital group Digital Currency Group (DCG) filed an objection regarding the settlement reached by its bankrupt subsidiary, crypto lender Genesis, with the New York Attorney General’s office (NYAG).
DCG challenges the basis of the settlement, which provides for payments to unsecured creditors based on the value of assets at the distribution date rather than at the petition date, as required by the Bankruptcy Code. The objection highlights that this settlement could violate the Bankruptcy Code by depriving DCG, as a creditor and equity holder, of a fair opportunity to participate in the payment hierarchy provided for in the debtors’ plan.
DCG’s concerns about value distribution
DCG criticizes the fact that the settlement allocates all residual value of the debtors’ assets to unsecured creditors, after payment to them, which could deprive DCG of its legitimate rights. As the sole equity holder in Genesis, DCG is considered a secured creditor.
Request for revision of the settlement
DCG argues that Genesis has failed to fulfill its obligations to all creditors and requests that the court withhold its approval of the settlement until DCG’s objections are addressed. This objection follows similar concerns raised by DCG regarding Genesis’ bankruptcy plan.
DCG’s objection comes in the context of a lawsuit filed by the NYAG against Genesis, DCG, and crypto exchange Gemini in October, accusing the defendants of investor fraud through the Gemini Earn program. Genesis suspended withdrawals in November 2022 and filed for bankruptcy in January 2023.
