Quick Look:
- Genesis Global Holdco LLC’s liquidation plan, promising $3B to creditors, has court approval.
- Genesis filed for Chapter 11 in January 2023 due to losses from Three Arrows Capital and FTX collapses.
- The plan covers 77% of customer claims, distributing $3B in cash and cryptocurrency.
Genesis Global Holdco LLC and its subsidiaries filed for Chapter 11 bankruptcy protection in January 2023. Substantial losses linked to Three Arrows Capital and FTX collapses precipitated this filing. The company owed over $3.5 billion to its top 50 creditors, marking a significant downturn for the digital asset lender.
In November 2022, the liquidity crisis faced by Genesis became evident when the company halted withdrawals. This suspension was a direct consequence of the financial strain imposed by the collapse of Three Arrows Capital, which significantly impacted Genesis’ liquidity.
Court Approves Plan to Return $3B Covering 77% of Claims
Fast forward to May 2024, and the court approved Genesis’ liquidation plan. The plan entails distributing $3 billion in cash and cryptocurrency to creditors, covering roughly 77% of the customer claims. This approval marks a critical step towards resolving the financial turmoil that has gripped the company and its customers.
In November 2023, Genesis and its parent company, Digital Currency Group (DCG), reached a settlement agreement. This settlement was part of a lawsuit involving $620 million in loans. So far, DCG has repaid $227.3 million and plans to pay an additional $275 million by April to fulfil the settlement terms.
The initial 35% Recovery Estimate Increased to 77% for $3B
When the bankruptcy claims were first listed on Xclaim, they traded at 35% of the account balance value. This initial valuation reflected the market’s expected limited recovery after Genesis’ financial collapse. The approved liquidation plan will see Genesis returning 77% of customer assets, amounting to $3 billion. This final recovery rate is significantly higher than the initial estimates, providing some relief to creditors who have endured a long wait for resolution.
Genesis Crypto Claims Over $10M Trading at 97-110% of Value
The trading values for bankruptcy claims have varied, influenced by the type and size of claims. High-value cryptocurrency claims over $10 million are trading at 97-110% of the claim value. In contrast, low-value claims, those under $1 million, are trading at 74-94% of the claim value. Mid-value fiat or stablecoin claims, ranging from $1-10 million, are trading at 89-91% of the claim value, while low-value claims are trading at 73-88%.
$3B Payout Excludes DCG, Prioritizes Unsecured Creditors
DCG, the parent company of Genesis, will not be included in the payout list. This decision underscores the prioritisation of unsecured creditors in distributing Genesis’ limited assets. DCG had assumed $1.1 billion of Genesis’s debt from the Three Arrows Capital collapse through a 10-year promissory note. However, this illiquid obligation fell short of covering the extensive losses. Genesis sued DCG over claims of missed loan payments, adding another layer of complexity to the financial entanglements between the entities. Initially, DCG argued for capping customer claims at the value of cryptocurrencies as of January 2023. They believed this approach would enable full repayment to customers and potentially allow DCG to recover some value. However, this argument did not prevail in court.
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