On Friday, May 17, Judge Sean Lane approved Genesis Global's Chapter 11 repayment plan, allowing the bankrupt crypto lender to start unfreezing and returning assets that have been locked since November 2022.
The court's approval enables Genesis to distribute approximately $3 billion in cash and crypto to its creditors.
As a result, Digital Currency Group (DCG), the parent company of Genesis, will not receive any funds from the bankruptcy proceedings.
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DCG had raised an objection to the court decision, arguing that repayments should be based on the value of the crypto assets in January 2023, when Genesis filed for bankruptcy. At that time, Bitcoin (BTC) was valued at around $24,000, much lower than its May 17 value of over $66,700.
However, Judge Lane dismissed this objection, stating that DCG did not have the legal standing to contest the Chapter 11 plan.
In a 135-page memorandum, Judge Lane explained that as a shareholder in Genesis, DCG holds a junior position in the hierarchy of repayments under Chapter 11. He emphasized that creditor claims totaling $32 billion, including those from federal and state financial regulators, must be addressed before any consideration is given to equity owners like DCG.
Judge Lane also noted:
Given the size of the creditor claims, DCG is out of the money as an equity holder by billions of dollars, even if the Court valued creditor claims using the method DCG proposes.
Genesis's financial difficulties started with the crypto bear market of 2022, culminating in a liquidity crisis that forced them to suspend withdrawals in November 2022 and ultimately file for bankruptcy in January 2023.
With this ruling, Genesis can now focus on returning funds to its creditors, aiming to restore some stability for those affected by its collapse.
