Creditors Accuse Genesis of Voter Manipulation in $175 Million Deal with FTX Amid Bankruptcy Proceedings

Creditors Accuse Genesis of Voter Manipulation in $175 Million Deal with FTX Amid Bankruptcy Proceedings

Crypto News – Genesis Global Capital (GGC), a crypto lender that filed for bankruptcy in January, is encountering obstacles in its efforts to wrap up proceedings. Accusations of voter manipulation have been leveled by creditors, including Gemini, against GGC regarding a proposed $175 million deal with the defunct exchange FTX.

This latest development, revealed in Thursday’s filings, adds to the challenges Genesis is facing as it aims to settle its affairs and return funds to its former customers. The bankruptcy has been marked by lengthy disputes over how to handle the more than one billion dollars owed by GGC’s parent company, Digital Currency Group (DCG, also the parent company of CoinDesk).

A legal agreement filed in mid-August between the two bankrupt entities allows FTX’s Alameda Research to claim $175 million from the Genesis estate. This represents a significant reduction from FTX’s initial claim of $4 billion. However, not all creditors are satisfied with this arrangement.

Gemini, a cryptocurrency exchange owed approximately $766 million by Genesis, criticized the proposed settlement with FTX, characterizing it as an attempt to manipulate the plan voting process and referring to it as a “sweetheart pre-plan deal.” They insisted that the proposal should not be accepted at face value.

As per bankruptcy procedures, creditors must vote on the proposed plans based on the size of their claims. Accusations of ballot-stuffing have emerged as creditors allege that Genesis sought to secure the support and votes of FTX Debtors through the proposed settlement, which they view as a distortion of the Chapter 11 process.

Genesis has not yet responded to CoinDesk’s request for comment, but its legal counsel has previously asserted that the FTX deal would significantly streamline the company’s reorganization process, saving it from the costs associated with prolonged litigation.

Another group of creditors, referred to as the “ad hoc” group, condemned FTX’s attempt to recover loans from its perceived “criminal enterprise” as unconscionable. They criticized FTX’s strategy of claiming billions from Genesis, characterizing it as a haphazard approach.

While the ad hoc group has not disclosed its membership, it has stated that its members are collectively owed $2.4 billion by GGC, representing a majority within each class of claims.

Gemini and other creditors have previously opposed the DCG deal and argued that Genesis should lose its monopoly rights to propose a wind-up plan. In July, Gemini also filed a lawsuit against DCG, alleging fraud by Genesis, a move that DCG countered by describing the allegations as “defamatory” and a “publicity stunt.””