Digital Currency Group (DCG), the parent company of Genesis, has raised concerns about Genesis Capital’s bankruptcy plan, arguing that it violates the U.S. Bankruptcy Code.
In a motion filed on February 5, DCG stated that Genesis proposed to overpay its customers, which goes against the law.
“DCG would support a plan that pays creditors one hundred cents on the dollar, and the estates currently have sufficient assets to do so,” the court filing reads, adding that the debtors have not proposed such a plan.
DCG mentioned that the bankruptcy plan, developed in collaboration with Genesis’ unsecured creditors and lenders, would pay them more than the full amount of their claims as of the date of the petition.
According to DCG, such a plan “disproportionately favors a small controlling group of creditors over others” and “violates the Bankruptcy Code.”
“It also strips DCG of other valuable economic and corporate governance rights further violating the Bankruptcy Code and demonstrating a lack of good faith. DCG cannot support such a plan, and the court should not approve it.”
Genesis, after failing to reach an agreement with DCG or its former partner Gemini, is now attempting to liquidate $1.6 billion of its assets.
Genesis, like many other crypto lending companies, has struggled with the cryptocurrency bear market of 2022.
The company suspended withdrawals in mid-November 2022 due to a liquidity crisis and filed for bankruptcy in January 2023.
Genesis is reported to owe more than $3.5 billion to its 50 largest creditors, including companies like Gemini.
On January 31, 2024, Genesis and its affiliates reached a $21 million settlement with the SEC.
Genesis’ legal team has requested a hearing on February 14 to include the SEC settlement as part of its bankruptcy proceedings.
In November 2023, Genesis announced that DCG had agreed to repay its outstanding loans of $324.5 million by April 2024.
The deal proposed by Genesis aimed to resolve a lawsuit from September that requested DCG repay $620 million in overdue loans.