Genesis Set to Return $3B Customer Assets in Finalized Bankruptcy Liquidation Plan

Bankruptcy claims began trading at 35% of account balance value when they were initially listed on claim trading marketplace Xclaim.

1. Genesis will return 77% of customer assets, worth $3 billion, in a court-approved liquidation plan.
2. Initially, bankruptcy claim trading platforms estimated that 35% of claims would be repaid following the announcement of the insolvency.
3. Digital Currency Group (DCG) will not be among the entities receiving a payout.

Genesis recently received court approval to distribute $3 billion in cash and crypto to its creditors, as outlined in a recent filing, representing about 77% of the value of customer claims. Notably, Digital Currency Group (DCG) will not be included among the entities receiving payments.

Genesis Global Holdco LLC, the holding company of Genesis, and its subsidiaries, declared Chapter 11 bankruptcy in New York in January 2023 following substantial losses from the collapses of Three Arrows Capital and FTX, owing over $3.5 billion to its top 50 creditors.

Following the bankruptcy announcement, the market was initially doubtful that customers would be fully compensated, and that the bankruptcy proceedings would conclude quickly. The bankruptcy claim marketplace Xclaim first listed Genesis claims at 35% of their value in January 2023.

Currently, Genesis claims for bitcoin or ether are trading between 97-110% for claims over $10 million, while claims under $1 million are trading for between 74-94%.

Claims for fiat currency or stablecoins in Genesis accounts are trading between 89-91% for accounts worth between $1-10 million, and between 73-88% for claims under $1 million.

DCG, the parent company of Genesis, will not receive any payout in the proceedings.

“The record here clearly establishes that there is not sufficient value in the Debtors’ estates to provide DCG a recovery as equity holder after unsecured creditors are paid,” wrote Judge Sean Lane in the filing. “Given the size of the creditor claims, DCG is out of the money as an equity holder by billions of dollars, even if the Court valued creditor claims using the method DCG proposes.”

DCG had previously argued for customer claims to be capped at the value of cryptocurrencies as of January 2023, which they believed would allow for full repayment to customers and potentially a recovery for DCG.

In the filing, Judge Lane noted that DCG assumed $1.1 billion of Genesis’s debt from the Three Arrows Capital collapse with a 10-year promissory note, but this illiquid obligation did not cover the losses, leading to scrutiny of DCG’s financial practices.

DCG and Genesis also had credit lines between the two companies, and Genesis ended up suing DCG over claims that the company missed payments on the loans it took.