Genesis Completes Bankruptcy
Genesis Global, a big name in the crypto lending world, has completed its bankruptcy restructuring process. After filing for bankruptcy in January 2023, the firm is now starting to distribute $4 billion in digital assets and cash to its remaining creditors.
Restructuring Process
In January 2023, Genesis Global filed for bankruptcy protection. This was a tough time for the company, which owed a lot of money to many people. The firm revealed it had over 100,000 creditors and liabilities that could reach up to $10 billion. Among the top creditors were well-known names like the crypto exchange Gemini, asset manager VanEck, and trading firm Cumberland.
Distribution of Assets
Now, Genesis has finished its restructuring process and is beginning to repay its creditors. The company will distribute about $4 billion in digital assets and U.S. dollars. Creditors will get back an average of 64% of their in-kind cryptocurrency repayments, although this amount will vary depending on the specific coin. For example, Bitcoin creditors will get back 51.28% of their Bitcoin, Ethereum creditors will receive 65.87% of their ETH, and Solana creditors will get back 29.58% of their SOL. Those who are owed stablecoins or U.S. dollars will receive 100% of their missing funds.
Transfers to Wallets
Wallets connected to Genesis have started transferring $1.5 billion worth of Bitcoin and Ether. The firm has reached out to its creditors with instructions on how to receive their funds. This marks a significant step in the process of repaying those who were owed money.
Recovery Rates
Genesis creditors will recover different percentages of their cryptocurrency depending on the coin. Bitcoin creditors will get back 51.28% of their Bitcoin, Ethereum creditors will receive 65.87% of their ETH, and Solana creditors will get back 29.58% of their SOL. Stablecoin and U.S. dollar creditors will receive 100% of their funds. Creditors will also be entitled to additional recoveries following the initial distribution, depending on ongoing claims reconciliation, contractual rights against third parties, and litigation.
Impact on Gemini
In May, Gemini announced that its clients had received full payouts from Genesis. Genesis was responsible for managing the assets in Gemini’s “Earn” product, which shut down following Genesis’ insolvency. This payout was a positive outcome for Gemini clients who had been worried about losing their investments.
Market Contagion Event
Genesis was one of many firms affected by the market contagion event following the market downturn of 2022. Many over-leveraged or poorly run businesses began to fail after the collapse of Terra. This event ultimately led to the catastrophic failure of the FTX crypto exchange. Genesis, which was already struggling due to the collapse of the Three Arrows Capital hedge fund, was further hit by the losses following the collapse of Alameda Research, run by convicted fraudster Sam Bankman-Fried.
Financial Troubles
Genesis’ financial troubles began with the collapse of the Three Arrows Capital hedge fund. To stay afloat, Genesis received a loan and a $1.1 billion promissory note from its parent company, Digital Currency Group (DCG). However, further losses after the collapse of Alameda Research forced Genesis to stop withdrawals and enter bankruptcy.
Lawsuit by New York Attorney General
Currently, DCG and Genesis are involved in a civil lawsuit brought by New York Attorney General Letitia James. She argues that the firms defrauded investors by lying about Genesis’ solvency and covering up a hole in its balance sheet. This lawsuit adds another layer of complexity to the already challenging situation for Genesis and its parent company.
Instructions for Creditors
Genesis has reached out to its creditors with detailed instructions on how to receive their funds. This step is crucial in ensuring that the distribution process goes smoothly and that creditors receive what they are owed without unnecessary delays.
Future Recoveries
Creditors can expect additional recoveries following the initial distribution of assets. These additional recoveries will depend on ongoing claims reconciliation, contractual rights against third parties, and ongoing litigation. This means that while creditors are receiving a portion of their funds now, there may be more to come in the future.
Closing
Genesis Global has taken significant steps to address its financial troubles and repay its creditors. Completing the bankruptcy restructuring and starting to distribute $4 billion in digital assets and cash is a major milestone. While the recovery rates vary by coin, the company is making efforts to ensure that creditors receive what they are owed. As Genesis continues to navigate legal challenges and work through claims reconciliation, creditors may see additional recoveries in the future.
