Genesis has been granted permission by the court to allocate $3 billion to its creditors, covering 77% of their claims. Notably, Digital Currency Group (DCG) is not included in the list of beneficiaries.

U.S. Bankruptcy Judge Sean Lane has endorsed Genesis Global's Chapter 11 liquidation strategy, enabling the insolvent cryptocurrency lender to reimburse creditors with approximately $3 billion in cash and cryptocurrencies.

This decision signifies that DCG, the parent company, will not retrieve any funds from the bankruptcy proceedings.

DCG's Lack of Recovery

Judge Lane's ruling comes after dismissing an objection from DCG, which contended that Genesis' creditor reimbursements should be limited to cryptocurrency prices as of January 2023, the time of the company's bankruptcy declaration. At that point, bitcoin was valued at $21,084. However, the price has since surged to around $66,900.

"We do not subscribe to the notion that claims are capped at the petition date value," remarked Sean O'Neal, a lawyer representing Genesis.

Judge Lane supported Genesis, stating that even if customer claims were constrained by lower prices, the company would still be obliged to compensate numerous other creditors.

As a subordinate stakeholder in Genesis during the Chapter 11 proceedings, DCG finds itself at the lowest rung of the reimbursement hierarchy. Lane indicated that the reimbursement process must prioritize creditor claims over the equity stakes held by shareholders like DCG.

"There are nowhere near enough assets to provide any recovery to DCG in these cases," Lane observed, highlighting the significant deficit amounting to billions that renders DCG's equity stake worthless.

Genesis attorney Sean O'Neal affirmed that the company is dedicated to reimbursing customers in cryptocurrency where feasible, acknowledging that the available digital assets fall short of the total owed amount.

Genesis' Bankruptcy Strategy

Genesis initiated bankruptcy proceedings in January 2023 after halting withdrawals in November 2022 due to a liquidity crunch. The firm owes over $3.5 billion to its top 50 creditors, including Gemini.

Since filing, Genesis has been liquidating $1.6 billion in assets following unsuccessful settlement negotiations with DCG and former partner Gemini.

In November 2023, Genesis disclosed that DCG had agreed to settle $324.5 million in loans by April 2024 to resolve a lawsuit filed in September seeking repayment of $620 million in overdue loans.

Genesis formulated a plan projecting that creditors who extended digital assets could reclaim up to 77%, a higher rate than if DCG had prevailed in court. This proposal garnered broad support from creditors, including customers of the Gemini Earn program.

Judge Sean Lane subsequently sanctioned Genesis' bankruptcy scheme and a related settlement with New York Attorney General Letitia James, redirecting assets to former Earn customers rather than state authorities. Lane also approved a settlement with the U.S. Securities and Exchange Commission, resolving a complaint over the now-defunct Earn program.