Genesis Global, a company that lends cryptocurrency and declared insolvency in 2022, has obtained court permission to distribute billions in cryptocurrency to its creditors. This approval follows a similar action by the FTX exchange, marking Genesis’s second significant effort to repay its debts.

Genesis's Repayment Strategy

On May 17, Judge Sean Lane approved Genesis’s Chapter 11 repayment strategy, allowing the company to reimburse creditors in Bitcoin (BTC) and other digital currencies instead of US dollars. This decision enables Genesis to start returning customer assets that were frozen since November 2022, after the collapse of various major cryptocurrency companies.

Genesis’s repayment plan has presented challenges for its parent company, Digital Currency Group (DCG), which recently faced legal troubles. Judge Lane dismissed DCG’s objections, stating that as an equity holder, DCG lacked the legal right to challenge the Chapter 11 plan.

Benefits for Creditors

Creditors who loaned cryptocurrency to Genesis may recover up to 77% of their funds as per the proposal, a significantly higher amount compared to potential returns if DCG’s objections had been accepted. The plan garnered strong support from creditors, including customers of the Gemini Earn lending program, operated in partnership with Gemini Trust.

Judge Lane also approved a settlement with New York Attorney General Letitia James, ensuring that assets would be returned to former Gemini Earn customers rather than state authorities. Furthermore, a separate agreement with the U.S. Securities and Exchange Commission (SEC) concerning the defunct Gemini Earn program was also endorsed by the court.

Key Points for Investors

Crucial points for stakeholders include:

Genesis creditors could receive up to 77% of their funds.

DCG’s legal challenges were dismissed, highlighting the priority of creditors.

Agreements with the New York Attorney General and the SEC guarantee the return of assets to Gemini Earn customers.

Potential effects on the cryptocurrency market due to asset liquidation.

The court’s approval of Genesis’s Chapter 11 repayment plan signifies a significant milestone in the company’s insolvency proceedings, aiming to offer some relief to its creditors. Looking ahead, Genesis is focused on executing the plan, with a keen eye on its implications for the broader cryptocurrency market.