News
Cryptocurrency lender Genesis will return $3 billion to customers in bankruptcy liquidation
By Dietrich Knauth
NEW YORK (Reuters) – Cryptocurrency lender Genesis Global received court approval on Friday to return about $3 billion in cash and cryptocurrencies to its customers in a bankruptcy liquidation, leaving its owner, Digital Currency Group, without any recovery from bankruptcy.
U.S. Bankruptcy Judge Sean Lane approved Genesis’ Chapter 11 liquidation plan and rejected an objection raised by DCG, which had argued that Genesis should not have to pay its customers and creditors more than the cryptocurrencies were valued at in January 2023, when Genesis filed for bankruptcy.
Cryptocurrency prices have risen sharply since Genesis filed for bankruptcy, and DCG and Genesis disagree over who should benefit from the price increase. Bitcoin, for example, was worth $21,084 in January 2023, compared to its current price of $67,000.
Lane overruled DCG’s objection, ruling that even if customer demands were limited to the lowest prices, Genesis would have to pay many other creditors, including federal and state financial regulators who had claimed $32 billion in claims, before he can give money to his DCG share owners.
“There are insufficient resources to provide recovery to the DCG in these cases,” Lane wrote.
Genesis is paying customers back in cryptocurrency where possible, but it doesn’t have enough cryptocurrency to pay back everything it owes.
Genesis attorney Sean O’Neal said Friday that the company disagrees with DCG’s assertion that customers could be paid “in full” based on lower cryptocurrency prices in January 2023.
“We don’t believe in the idea that requests are limited to the value of the date of the petition,” O’Neal said.
Genesis estimated in February that it would be able to pay its customers up to 77% of the value of their receivables, depending on future price fluctuations.
DCG could not immediately be reached for comment Friday evening.
(Reporting by Dietrich Knauth; Editing by Sandra Maler and Leslie Adler)