Genesis’ bankruptcy plan faces pushback from parent company DCG over creditor payouts
Digital Currency Group claimed that some 'influential creditors controlling the UCC and Ad Hoc Group' pressured Genesis into its bankruptcy plan.
Digital Currency Group (DCG), the parent company of the defunct crypto lender Genesis, has filed an objection against the approval of its subsidiary’s bankruptcy plan, which was created via a “clandestine approach.”
In a Feb. 5 court filing, DCG argued that Genesis’ plan aims to exceed legal obligations by overcompensating creditors. According to the firm, such action constitutes a breach of the bankruptcy code and reflects a lack of good faith.
The crypto company contends that the plan unfairly disadvantages it while eroding its fundamental economic and corporate governance privileges.
“The Debtors (Genesis), in concert with the UCC and Ad Hoc Group, have devised a cramdown plan that pays unsecured creditors hundreds of millions of dollars more than the full amount of their petition date claims—and which disproportionately favors a small controlling group of creditors over others—in violation of the Bankruptcy Code,” DCG added.
Consequently, DCG urged the court to dismiss the proposed plan, emphasizing its inability to endorse such “complex and convoluted Distribution Principles.”
Meanwhile, DCG pointed out that it was willing to “fully support a plan that provides a 100% recovery for creditors—par plus post-petition interest” if all of its concerns were met.
This is not the first time both companies have been involved in a face-off. Last year, Genesis took legal action against DCG to recoup a substantial loan exceeding $700 million, encompassing both fiat and cryptocurrency repayments slated for May 2023.
Genesis, alongside several cryptocurrency lending firms like Celsius, succumbed to the 2022 bear market turmoil. The company filed for bankruptcy in January 2023 following the suspension of withdrawals triggered by the FTX collapse in November 2022.
Since then, the lender has continued with its bankruptcy process and recently moved to liquidate $1.4 billion of its assets held in Grayscale Bitcoin Trust (GBTC), which recently converted to a spot exchange-traded fund (ETF).