The successful resolution of Genesis’ bankruptcy has broader implications for the cryptocurrency industry. An organized liquidation that results in reasonable recoveries from creditors could help restore some of the lost confidence.
Cryptocurrency lender Genesis Global Capital filed a modified Chapter 11 bankruptcy plan on Wednesday, October 25, to resolve outstanding creditor claims and interests.
The revised plan is the result of extensive negotiations between Genesis, the Official Committee of Unsecured Creditors, cryptocurrency exchange Gemini, and the Genesis Ad Hoc Group of Lenders. While substantial agreement has been reached on key issues, discussions continue and all parties reserve their rights under the submission.
Modified Genesis Bankruptcy Plan
The amended plan classifies creditors’ claims against Genesis Global Holdco into 10 classes, with 4 classes of cryptocurrency-denominated unsecured claims divided by currency. The unsecured rights of Fiat, Bitcoin, Ethereum and other alternative cryptocurrencies would be harmed, giving them the right to vote on the plan.
Meanwhile, subordinate claims, government sanction claims and interest are seen rejecting the non-voting plan. The differential treatment of cryptoasset claims recognizes the divergent interests of Genesis’ creditors.
Under the proposed plan, Genesis entities would be liquidated by newly established “Liquidation Debtors” and overseen by a Plan Managing Officer, a new Board, and a Liquidation Oversight Committee. Liquidated debtors would liquidate assets to distribute to creditors according to agreed principles.
Segregated accounts would be established for plan distributions, including claims, professional fees, litigation, and liquidation reserves. Intercompany claims between Genesis Global Capital and Genesis Asia Pacific would be resolved to equal creditor recoveries.
Changes in corporate governance are also described, including the replacement of the entities’ boards of directors with the New Board. The causes of action would be preserved for possible action by the Liquidated Debtors.
The plan incorporates an intercompany claims agreement between Genesis Global Capital and Genesis Global Holdco, granting the former proceeds from the monetization of Genesis trading platform assets.
Genesis Chapter 11 Bankruptcy
Genesis had filed for Chapter 11 protection in November 2022, citing extreme market dislocation and loss of industry confidence following the collapse of crypto exchange FTX. The proposed plan aims to resolve its bankruptcy in an orderly manner.
Cryptocurrency lenders like Genesis experienced difficulties in 2022 as cryptocurrency market prices fell sharply. Lender Celsius Network also filed for bankruptcy last year.
Genesis creditors have divergent interests depending on whether the claims are denominated in fiat money, Bitcoin, or an alternative cryptocurrency. Ongoing discussions are likely to focus on balancing these competing priorities.
Genesis’ bankruptcy filing and reorganization plan represents the fallout from the “crypto winter” of 2022, which saw both prices and industry sentiment drop.
Genesis Says NY AG Lawsuit May Force “No Deal” Bankruptcy Liquidation
Genesis Global said on Tuesday that a civil fraud lawsuit in New York could lead to a bankruptcy liquidation that does not resolve its claims against parent company Digital Currency Group (DCG).
The lawsuit seeks to prohibit the three cryptocurrency firms from accessing the financial investment sector in New York, which would jeopardize their efforts to reach a long-term agreement.
Rather than wait for the outcome of the lawsuit, Genesis intends to propose a “no-deal” bankruptcy plan to distribute available crypto assets to customers and establish a process to preserve lawsuits against DCG and others, Genesis attorney Sean O’Neal said at a court hearing in New York.
By Audy Castaneda
