Genesis will distribute $3 billion in cash and crypto, covering 77% of client claims at current value, following its bankruptcy filing in January 2023.
Digital Currency Group will not receive payment in Genesis’ liquidation, despite its efforts to limit losses after Three Arrows Capital collapsed.
DCG had advocated for client claims to be capped at the value of cryptocurrencies in January 2023, but was unsuccessful.
The Genesis group and its subsidiaries filed for Chapter 11 bankruptcy protection in New York in January 2023. This came after significant losses related to the collapses of Three Arrows Capital and FTX, totaling over $3.5 billion owed to its 50 top creditors.
The initial market uncertainty regarding Genesis’ ability to repay its clients had caused the value of claims to drop to 35% of their initial value on several platforms, before the crypto market rebounded.
Court Agreement and Asset Distribution
Recently, Genesis received court approval to distribute $3 billion in cash and crypto to its creditors, representing approximately 77% of the value of client claims.
Unlike FTX’s repayment plan, the value of each crypto claim is calculated at current prices.
However, Digital Currency Group (DCG), the parent company of Genesis, is not among the entities that will receive payment. Judge Sean Lane clarified that the debtors’ asset value was insufficient to allow repayment to DCG as an equity holder after paying unsecured creditors.
Implications for DCG
DCG, which had argued for client claims to be capped at the value of cryptocurrencies in January 2023, was unsuccessful, ruling out any possibility of recovery for DCG.
DCG had assumed $1.1 billion of Genesis’ debt following the collapse of Three Arrows Capital, in the form of a 10-year payment promise, but this illiquid obligation did not cover the losses, leading to a review of DCG’s financial practices.
In addition, credit lines between DCG and Genesis resulted in a lawsuit, with Genesis suing DCG for defaulting on contracted loans.
In November 2023, DCG and Genesis announced a repayment plan, with DCG already paying $227.3 million and planning to pay an additional $275 million by April, to settle a dispute involving $620 million in loans.
