Coin Edition -
- Judge approves $3 billion Genesis plan.
- Repayment prioritizes current crypto value.
- Ruling sets precedent for future cases.
In a victory for creditors, a U.S. bankruptcy judge on Friday approved a plan by Genesis Global Capital, a bankrupt cryptocurrency lender, to repay approximately $3 billion in a combination of digital assets and cash. The ruling by Judge Sean Lane of the Southern District of New York overrode objections from Genesis’ parent company, Digital Currency Group (DCG), which had proposed a different repayment structure.
Under the approved Chapter 11 liquidation plan, Genesis will prioritize repaying creditors with digital assets whenever possible. However, the plan also allows for cash disbursements based on the current market value of those assets. This approach stands in contrast to DCG’s proposal, which sought to peg repayments to the value of cryptocurrencies on the date Genesis filed for bankruptcy in January 2023.
At that time, Bitcoin, the world’s leading cryptocurrency, traded at around $21,084. Since then, the market has experienced a significant rebound, with Bitcoin currently hovering around $66,889 according to TradingView data. This price increase could lead to creditors receiving a more favorable return under Genesis’ plan than DCG had anticipated.
Judge Lane’s decision acknowledged the potential impact of future price fluctuations. He noted that Genesis faces claims from various creditors, including federal and state financial regulators, totaling $32 billion. These claims will be addressed before any distribution to DCG occurs.
A February estimate by Genesis suggested that creditors could recover up to 77% of their claims under the approved plan. However, this figure remains subject to the ongoing volatility of the cryptocurrency market.
In a move that could reshape the landscape of crypto bankruptcy proceedings, Judge Lane’s decision establishes a precedent for prioritizing current market value over historical prices when determining creditor payouts. This ruling is likely to be closely watched by other struggling crypto firms and their creditors, with potential implications for ongoing and future bankruptcy cases within the industry.
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