Digital Currency Group Objects to Genesis Global Capital’s Bankruptcy Plan
Digital Currency Group (DCG) has filed a motion objecting to the bankruptcy plan proposed by its subsidiary, Genesis Global Capital. DCG argues that the plan violates the Bankruptcy Code by favoring certain creditors and exceeding customers’ entitlements. Genesis has suggested offering extra payouts to compensate for the increasing value of cryptocurrencies, which DCG believes goes against US bankruptcy laws. DCG maintains that compensation should be based on the assessed value of crypto assets at the time of the bankruptcy declaration. The objection also highlights the disproportionate benefits granted to unsecured creditors, potentially violating bankruptcy law principles.
Genesis’ Bankruptcy Plan Falls Short of Full Compensation
According to DCG, Genesis’ proposed plan does not meet the standard of paying creditors their full claims. The plan fails to comply with Section 502(b) of the Bankruptcy Code, which requires claims valuation in US dollars as of the petition date. By allowing certain claims to inflate based on asset appreciation after the petition, the plan allegedly diverts assets to favored creditors unlawfully. DCG argues that a small group of powerful creditors have inserted favorable setoff provisions to minimize their obligations while maximizing recoveries.
DCG Settles Short-Term Loans with Genesis
Last month, DCG announced that all short-term loans from Genesis have been paid off. Over the past year, DCG settled more than $1 billion in debts to various creditors and allocated nearly $700 million to its bankrupt subsidiary. This objection follows that announcement and raises concerns about Genesis’ bankruptcy proceedings.
Genesis’ Recent Bankruptcy Proceedings
In January 2023, Genesis filed for bankruptcy after suspending withdrawals due to a liquidity crisis in November 2022. In 2024, Genesis settled with the SEC for $21 million in a lawsuit related to its Gemini Earn lending program. Recently, Genesis petitioned the Bankruptcy Court to sell shares in various Grayscale trusts, aiming to maximize funds for distribution to creditors.
Hot Take: DCG Challenges Genesis’ Bankruptcy Plan
DCG’s objection to Genesis Global Capital’s bankruptcy plan raises concerns about violations of the Bankruptcy Code and disproportionate benefits to certain creditors. By proposing extra payouts based on cryptocurrency value appreciation, Genesis may be favoring select creditors while stripping DCG of its rights. This objection highlights the need for adherence to US bankruptcy laws and fair compensation based on assessed asset values. The outcome of this dispute will determine how Genesis’ bankruptcy proceedings unfold and whether they align with legal requirements and principles.
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