Crypto News – Understanding the Implications of Genesis Bankruptcy Case’s Refund Decision
Crypto News – The cryptocurrency trading and lending business Genesis Global Capital has obtained court permission to reimburse its clients for $3 billion. This choice comes after the bankruptcy of FTX, a cryptocurrency exchange, and significant exposure to Three Arrows Capital (3AC), which caused Genesis to have a liquidity problem in November 2022.
The company’s problems started 20 months ago when it blocked withdrawals and deposits from its platform, which prompted it to file for Chapter 11 bankruptcy protection in the US. But when US Bankruptcy Judge Sean Lane approved Genesis’s restructuring plan, the case achieved a critical turning point. Although some parties, including Genesis’ parent firm Digital Currency Group (DCG) and its Crypto Creditors Ad Hoc Group, are against the plan, it calls for returning 77% of the company’s debts to customers in cash and digital assets.
Judge Lane Dismisses Complaints and Approves Restructuring
In an attempt to lower the compensation percentage suggested by independent advisors supervising Genesis’ Chapter 11 proceedings, these corporations filed a second case with the US Bankruptcy Court in the Southern District of New York (Manhattan). DCG argued that Genesis should return a smaller portion of its debt to consumers, including high-value clients.
Furthermore, the companies contended that they ought to get an equity dividend, whereas consumers using cryptocurrency only obtain a portion of the lent coins, leading to an unfair enrichment of Genesis creditors at DCG’s expense. Judge Lane, however, rejected this complaint and upheld Genesis’ suggested restructuring. A crucial step in resolving the company’s liquidity crisis has been taken with this decision, which requires it to repay $3 billion to the impacted customers and creditors. The judge also decided that debtors who owe cryptocurrency will not receive the same treatment as those who owe fiat currencies, such as the US dollar.
FAQ
What’s Happening with Genesis?
Genesis quickly reached a restructuring agreement with DCG, Gemini, and its principal creditors following its Chapter 11 filing in January 2023.
What is a Chapter 11 Filing?
It is common to refer to a case filed under chapter 11 of the US Bankruptcy Code as a “reorganization” bankruptcy. Typically, the debtor keeps “in possession,” has trustee-like authority and responsibilities, is free to carry on with its operations, and can take out additional loans with the permission of the court.
Who is Sean H. Lane?
On September 7, 2010, Sean H. Lane took the oath of office as a United States Bankruptcy Judge for the Southern District of New York. Judge Lane received his J.D. from New York University School of Law in 1991 after graduating with a B.A. from New York University College of Arts & Science in 1987.
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