Approval in the Expected Cryptocurrency Case: 3 Billion Dollars Will Be Distributed to Users

a bankrupt cryptocurrency In a landmark decision, lender Genesis has received court approval to distribute billions of dollars in digital assets and cash to its creditors.

Late Friday, Judge Sean Lane ruled that Genesis Bitcoin and other approved a Chapter 11 repayment plan that includes a unique structure for returning cryptocurrencies to creditors. This decision paves the way for Genesis to return customer assets that have been frozen on the platform since November 2022 following the collapse of other major crypto firms.

Judge Lane dismissed DCG’s legal challenge in a sweeping 135-page decision, stating that Genesis’ parent company lacked legal standing to challenge the Chapter 11 plan. As the equity owner of Genesis, DCG is last in line for repayment in Chapter 11. Judge Lane stated that any value that the company’s bankrupt subsidiary was required to distribute was absorbed by creditors who were not fully repaid and stood before DCG.

“Given the magnitude of the creditors’ claims, DCG is left out as a multi-billion dollar capital holder,” Judge Lane said.

DCG had argued that the plan provided an unacceptable benefit to Genesis creditors at its own detriment. The parent company insisted creditor claims should be determined by where crypto prices stood when its subsidiary filed for bankruptcy in early 2023. At the time, Bitcoin was trading around $24,000, and on Friday it was above $66,700.

DCG may appeal Judge Lane’s decision.

Genesis estimates that creditors who loaned it digital assets could receive up to 77% refunds under its proposal, but significantly less if DCG prevails. The bankrupt company’s bid has received broad support from its creditors, which include customers of Gemini Earn, a lending program run in partnership with Gemini, the billionaire Winklevoss brothers’ company.

Judge Lane also said he would approve a settlement involving New York Attorney General Letitia James, who sued Genesis over the Earn program. The deal is structured so that assets that might otherwise go to state authorities are instead returned to former Earn customers.

*This is not investment advice.