Crypto lender Genesis to return $3 billion to customers in bankruptcy wind-down

Crypto lender Genesis Global received a significant victory in bankruptcy court on Friday, securing approval for its liquidation plan that will return approximately $3 billion in cash and cryptocurrency to its customers. The ruling, however, delivers a blow to Genesis's owner, Digital Currency Group (DCG), which will receive no recovery from the bankruptcy.

U.S. Bankruptcy Judge Sean Lane overruled DCG's objection to the plan, which centred on the valuation of crypto assets. DCG argued that customer claims should be capped at the value of cryptocurrencies in January 2023, when Genesis filed for bankruptcy. Crypto prices have surged since then, with Bitcoin, for example, rising from $21,084 in January 2023 to its current price of around $67,000.

Judge Lane rejected DCG's argument, stating that even with the lower valuation, Genesis would have to prioritise paying other creditors, including federal and state financial regulators with claims totalling $32 billion, before distributing funds to its equity owner.

"There are nowhere near enough assets to provide any recovery to DCG in these cases," Judge Lane wrote in his ruling.

Genesis aims to return funds to customers in cryptocurrency wherever possible, although it lacks sufficient crypto assets to fully repay all outstanding claims.

Sean O'Neal, an attorney representing Genesis, refuted DCG's assertion that customers could be paid in full based on the lower January 2023 valuations. "We don't buy into the idea that claims are capped at the petition date value," O'Neal stated.

Genesis initially estimated in February that it could repay up to 77% of the value of customer claims, subject to future fluctuations in cryptocurrency prices.

This court approval marks a significant step forward in the resolution of Genesis's bankruptcy, providing much-needed relief to its customers while leaving its owner, DCG, without any financial recovery.