Genesis, a cryptocurrency lending institution that filed for bankruptcy in January 2023 after being hit by the Three Arrows Capital and FTX liquidation domino effect in November 2022, is facing opposition from its parent company, Digital Currency Group (DCG), regarding its latest bankruptcy repayment plan.
According to reports from Reuters and Cointelegraph, DCG has officially submitted a motion to the court, expressing its opposition to Genesis’ repayment plan. DCG argues that Genesis is violating US bankruptcy law by proposing to pay creditors more than their rightful claims and insists that Genesis should only repay the amount equivalent to the value of the cryptocurrency assets at the time of the bankruptcy filing in January 2023.
Genesis and the main creditors’ group hope to value cryptocurrencies like Bitcoin and Ethereum at prices closer to the current market value in their repayment plan, in order to reflect the increased value of digital assets during the bankruptcy process. However, DCG claims that Genesis’ current assets are already sufficient to repay creditors 100% based on the cryptocurrency valuation in January 2023, and there are still remaining assets to be paid to DCG.
If the proposed repayment plan is valued closer to current prices, it is expected that Genesis’ repayment amount will exceed the total claimed amount at the time of the bankruptcy filing by hundreds of millions of dollars. DCG argues that such a plan favors a group of minority creditors and violates bankruptcy law.
It is worth noting that in a recent bankruptcy case involving FTX, the liquidation team proposed estimating the assets’ value based on the “fair and reasonable” value on November 11, 2022, the bankruptcy date, which sparked complaints from dozens of angry creditors. However, the US bankruptcy judge overseeing the FTX restructuring rejected the creditors’ request to value their assets based on current prices on the platform, stating that US bankruptcy law is “very clear” and that valuing customer claims based on the prices at the time of bankruptcy is correct.
After reaching a settlement with the US Securities and Exchange Commission (SEC) and agreeing to pay a fine of $21 million, Genesis plans to seek court approval for its repayment plan at a hearing scheduled for February 14, 2023.
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