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Genesis to Return 77% of Customer Assets in Court-Approved Liquidation Plan

Genesis, Bitcoin

Genesis Global Holdco LLC and its affiliates declared bankruptcy under Chapter 11. The financial filing was a direct result of substantial losses incurred due to the failure of Three Arrows Capital and FTX, which totaled more than $3 billion. The bankruptcy announcement was followed by a high degree of uncertainty in the market regarding the potential recovery for customers and the timeline for bankruptcy proceedings.

Initially, the bankruptcy claim marketplace Xclaim listed Genesis claims at 35% of their value, reflecting concerns about financial stability. In any case, recent developments have changed this outlook significantly.

Court-Approved Liquidation and Payout Details

Approximately 77% of customer claims will be allocated from the $3 billion in cash and crypto distributed by Genesis, according to recently approved court orders. Specifically, the parent company of Genesis, DCG, will not receive any payout from this distribution.

The size of the creditor claims makes it clear that DCG is out of the money as an equity holder by billions of dollars, said Judge Sean Lane. The decision was reached based on the fact that the value of the Debtors’ estates was insufficient to cover DCG’s recovery after unsecured creditors are paid.

Market Adjustments and Current Trading Values

Initially, bankrupt entities were able to sell their claims for 35% of their account balance value on Xclaim at the time of listing. Currently, the trading values have improved to a significant degree. Genesis asserts that bitcoin or ether are now trading between 97-110% for claims over $10 million. The percentage at which claims for fiat currency or stablecoins trade is 89-91% for accounts valued between $1-10 million, and 73-88% for claims below $1 million.

READ:  Bankruptcy Settlement Between DCG and Genesis Creditors

Interestingly, despite the positives for creditors, DCG will not benefit from the recovery plan. Previously, DCG had posited a strategy of capping customer claims at the value of cryptocurrencies as of January 2023 to facilitate their own recovery. However, the court valued creditor claims using DCG’s proposed method would still leave the company billions of dollars short, according to Judge Lane.

DCG’s Financial Troubles

A 10-year promissory note would be issued in response to a 1 billion debt assumption from the Three Arrows Capital collapse. That obligation, however, did not cover the losses to a considerable degree. Moreover, DCG missed payments on Genesis’s credit line, leading to a lawsuit.

In November 2023, following a repayment agreement, DCG paid $227 to Genesis. – A total of $3 million has already been paid, with plans to pay an additional $275 million by April to settle the $620 million lawsuit over missed loan payments.

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