DCG says Genesis repayments to exceed owed amounts
Digital Currency Group (DCG) has objected to the bankruptcy plan proposed by its subsidiary, Genesis Global Capital.
DCG’s contention centers around Genesis’s plan to offer its customers “additional payouts” that reflect the increased value of cryptocurrencies since January 2023, when Genesis filed for bankruptcy. DCG argues that such payouts exceed what customers and creditors are legally entitled to under U.S. bankruptcy law.
DCG insists that repayments should be based on the value of the crypto assets at the time of the bankruptcy filing, rather than their current, higher market prices. This stance is driven by concerns that Genesis’s approach could leave fewer assets available for DCG after customer repayments are made, given the rise in the value of assets like bitcoin since the filing.
Genesis is currently in the process of liquidating its assets after unsuccessful settlement attempts with DCG, its former business partner Gemini, and regulators. The company did, however, reach a settlement with the U.S. Securities & Exchange Commission (SEC), agreeing to pay the agency $21 million from any remaining assets after customers are fully repaid.
The backdrop to this dispute includes a lawsuit filed by the SEC against Genesis and Gemini Trust, alleging illegal securities sales through their Gemini Earn crypto lending program. This program, launched in December 2020, enabled Gemini customers to lend their crypto assets to Genesis in return for interest, amassing billions in crypto assets from investors. The Earn program’s failure during the crypto market crash in November 2023 has led to litigation involving Genesis, Gemini, and DCG.
Gemini, led by the Winklevoss twins, has supported Genesis’s bankruptcy plan to repay customers who have been unable to access their assets for over 16 months.
The news comes shortly after Genesis Global Trading has reached a settlement with the New York Department of Financial Services (NYDFS), agreeing to pay an $8-million penalty and cease its operations in New York. As part of the settlement, the U.S.-focused spot crypto trading business will surrender its BitLicense, which it has held since 2018.
Genesis’s bankruptcy has had a terrible impact on the Gemini Earn program and has spawned a series of lawsuits, including one by Gemini against Digital Currency Group and its CEO Barry Silbert, alleging fraud. Conversely, Genesis has also sued DCG seeking repayment of loans exceeding $600 million.
