Authorities in the U.S. granted Genesis Global Capital court approval to distribute billions of dollars in digital assets and cash to creditors. Judge Sean Lane's decision overruled a legal challenge from its parent company, Digital Currency Group (DCG). This ruling clears the path for Genesis to return customer assets frozen since November 2022.

Chapter 11 Repayment Plan Approved

Over a year after Genesis Global Capital filed for bankruptcy, the failed company's Chapter 11 repayment plan finally received judicial approval on Friday, May 17th. Judge Sean Lane approved and signed the plan's unique structure for returning Bitcoin and other cryptocurrencies to creditors. Genesis' creditors and customers of the Gemini Earn program had also garnered massive support for the repayment plan, a lending initiative run jointly with Gemini Trust Co., founded by the Winklevoss brothers.

Legal Challenges and Opposition

Genesis was not pleased with the court ruling. It argued that when it filed for bankruptcy in early 2023, the price of BTC was $24,000, while it is currently about $67,000.

The repayment plan resulted in an 'impermissible windfall' for creditors, and claims should be calculated based on the value of crypto assets in January 2023.

Nonetheless, Genesis' attorney, Sean O'Neal, dismissed this notion, stating, 'We don't buy into the idea that claims are capped at the petition date value.'

Judge Lane rejected DCG's objection, stating that the parent company has no legal right to challenge Genesis' Chapter 11 plan. In his order, J. Lane wrote, 'Given the size of the creditor claims, DCG is out of the money as an equity holder by billions of dollars.'

Impact on Creditors

As per the liquidation proceedings, DCG, as an equity holder, stands last in line for repayment, and Genesis's value is first paid back to the creditors.

Therefore, as per the approved plan, Genesis' creditors can recover up to 77% of their claims. A related settlement with New York Attorney General Letitia James was also approved by Judge Lane, who had sued Genesis' Gemini Earn program. The settlement ensures that the former Earn customers will have assets redirected to their wallets, potentially owed to state authorities.

Additionally, a previous Gemini Earn Program settlement with the U.S. Securities and Exchange Commission was confirmed, concluding another legal challenge faced by Genesis.

The court's decision to approve Genesis' Chapter 11 plan has sanctioned the distribution of approximately $3 billion in cash and cryptocurrency to the failed company's creditors and Gemini Earn program customers.

Meanwhile, the parent company DCG has yet to recover from bankruptcy, as its claims are subordinate to those of Genesis' creditors.