Bankruptcy claims began trading at 35% of account balance value when they were initially listed on claim trading marketplace Xclaim.
-Genesis will return 77% of customer assets, worth $3 billion, in a court-approved liquidation plan
-Bankruptcy claim trading platforms were initially pricing in 35% of claims would be repaid shortly after the insolvency was announced
-Digital Currency Group (DCG) will not be among the entities receiving a payout
Genesis recently secured court approval to distribute $3 billion in cash and crypto to its creditors, according to a recent filing, representing approximately 77% of the value of customer claims – however Digital Currency Group (DCG) will not be included in the list of entities paid out.
Genesis Global Holdco LLC, the holding company of Genesis, and its subsidiaries filed for Chapter 11 bankruptcy protection in New York in January 2023 due to significant losses from the collapses of Three Arrows Capital and FTX, with over $3.5 billion owed to its top 50 creditors.
In the immediate aftermath of the filing, the market was skeptical that customers would be made whole and the bankruptcy proceedings would be completed in an expedient manner. Bankruptcy claim marketplace Xclaim initially listed Genesis claims at 35% of their value in January 2023.
As of today, 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 be paid out 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," Judge Sean Lane wrote 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.
DCG and Genesis announced in November 2023 that the two companies have reached a repayment plan, with DCG having paid $227.3 million so far and planning to pay another $275 million by April, to settle a lawsuit over $620 million in loans.
