Genesis Global Capital, a prominent crypto lender, has taken a significant step in its journey to resolve outstanding creditor claims as it filed an amended Chapter 11 bankruptcy plan on October 25th.
This development follows extensive negotiations involving Genesis, the Official Committee of Unsecured Creditors, Gemini crypto exchange, and the Ad Hoc Group of Genesis Lenders.While substantial progress has been made in addressing key issues, negotiations continue, with all parties retaining their rights as stipulated in the filing.
The amended bankruptcy plan introduces a comprehensive categorization of creditor claims against Genesis Global Holdco into 10 distinct classes. Of particular note are the four classes dedicated to crypto-denominated unsecured claims, which are further divided based on the currency involved—fiat, Bitcoin, Ethereum, and alternative cryptocurrencies.
This differentiation reflects the varying interests of Genesis creditors, with the impaired status of these claims entitling them to vote on the proposed plan. In contrast, subordinated claims, government penalty claims, and interests are marked as rejecting the plan, without voting rights.
Under the proposed plan, Genesis entities are slated for a structured wind-down process, managed by newly established “Wind-Down Debtors.” These entities will operate under the oversight of a Plan Administrator Officer, a New Board, and a Wind-Down Oversight Committee. The primary objective is to liquidate assets efficiently and distribute proceeds to creditors in accordance with agreed-upon principles.
Segregated accounts for plan distributions
In a bid to ensure transparency and fairness, the plan includes the establishment of segregated accounts for plan distributions. These accounts will cater to various purposes, including claims, professional fees, litigation costs, and wind-down reserves. Additionally, the plan outlines the settlement of intercompany claims between Genesis Global Capital and Genesis Asia Pacific to align creditor recoveries.
The proposed plan also entails corporate governance changes within the Genesis entities. Specifically, it calls for the replacement of existing entity boards with a New Board. Moreover, the plan retains causes of action for potential pursuit by the Wind-Down Debtors, preserving legal avenues for addressing outstanding issues.
A notable aspect of the plan is the settlement of intercompany claims between Genesis Global Capital and Genesis Global Holdco. This settlement includes the allocation of proceeds from the monetization of Genesis trading platform assets to the former entity, potentially aiding in creditor recoveries.
Genesis chapter 11 bankruptcy background
Genesis Global Capital initially filed for Chapter 11 protection in November 2022, citing extreme market dislocation and a loss of industry confidence following the collapse of the crypto exchange FTX. The bankruptcy proceedings seek to address the fallout from the challenging period known as the “crypto winter” in 2022 when cryptocurrency market prices and industry sentiment took a severe hit. It’s worth noting that fellow crypto lender Celsius Network also filed for bankruptcy during the same period.
The resolution of Genesis Global Capital’s bankruptcy carries broader implications for the cryptocurrency industry as a whole. An orderly wind-down process resulting in reasonable creditor recoveries could contribute to the restoration of lost confidence in the industry.
However, it’s important to emphasize that negotiations are ongoing, and the final terms of the plan remain undecided. While the amended plan signifies significant progress, it does not represent a definitive agreement between the involved parties.
Genesis Global Capital’s amended Chapter 11 bankruptcy plan marks a pivotal step in the effort to address outstanding creditor claims. With negotiations ongoing, the cryptocurrency industry watches closely, as the successful resolution of this case could potentially help rebuild confidence in a sector that weathered the storm of the 2022 “crypto winter.”
The plan’s comprehensive categorization of claims, commitment to transparency, and corporate governance changes demonstrate a concerted effort to navigate through challenging circumstances and find a solution that benefits all stakeholders.