The accusations of vote-buying and manipulation have added complexity and uncertainty to the Genesis bankruptcy case.
Bankrupt crypto lender Genesis Global Capital (GGC) is facing new charges from creditors that the proposed $175 million transaction with the insolvent FTX exchange is an attempt to manipulate the bankruptcy process through vote buying.
These allegations, made in recent files on Thursday, cast a shadow over GGC’s efforts to wind down its operations and restore funds to former customers.
Genesis Global’s Complex Relationship with DCG
One of the central issues in the Genesis bankruptcy case has been the treatment of over a billion dollars owed by Digital Currency Group (DCG), the parent company of Genesis Global. This outstanding debt has been a source of contention, and the resolution of this matter has been a significant point of contention among creditors.
In mid-August, Genesis and FTX filed a legal agreement that allows FTX’s Alameda Research to claim $175 million from the GGC estate. This figure represents a substantial reduction from the initial $4 billion that FTX had sought. However, this tentative agreement has not been met with approval from all of Genesis Global’s creditors.
Gemini, a prominent crypto exchange and one of Genesis’s creditors owed approximately $766 million, expressed dissatisfaction with the proposed settlement. In a late-night filing, Gemini accused Genesis of attempting to manipulate the plan voting process, labeling the deal a “sweetheart pre-plan deal.”
Essentially, Gemini argued that Genesis’ proposal could not be accepted at face value and raised concerns about the fairness of the deal. Bankruptcy plans typically require approval through a vote by creditors based on the proportion of their claims.
The discontented creditors, including Gemini and a group calling itself the “Fair Deal Group”, have accused Genesis of attempting to buy the support of the FTX Debtors and their votes. They consider this a perversion of the Chapter 11 bankruptcy process.
Furthermore, an “ad hoc” group of creditors have vehemently opposed FTX’s attempts to reclaim the loans. These creditors have described FTX’s strategy in claiming billions against Genesis as little more than an attempt to throw everything against the wall and see what sticks.
The Impact Genesis FTX Deal on the Bankruptcy Process
These accusations of vote-buying and manipulation have added complexity and uncertainty to the Genesis bankruptcy case. If proven true, it could significantly delay the resolution of the bankruptcy and potentially result in legal actions against those involved.
Genesis, however, has argued that the FTX deal will help smooth the path to reorganizing the company without the burden of prolonged litigation. The company has yet to respond to these recent allegations.
Overall, the Genesis bankruptcy case serves as a harsh reminder of the difficulties and issues that can occur in the crypto industry, particularly when big sums of money are at stake. It remains to be seen how this legal battle will ultimately play out and what impact it will have on the future of Genesis and the broader crypto sector.