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Bankrupt Crypto Lender Genesis Seeks Court Help to Reduce Settlement Payout to 3AC

Source: Pexels

Digital Currency Group’s (DCG) subsidiary Genesis Global is seeking approval from the US court to revise its settlement agreement with the bankrupt Three Arrows Capital Ltd (3AC).

According to a document filed on November 9 with the US bankruptcy court of the Southern District of New York, Genesis said in its summary statement that 3AC debtors should accept a general unsecured claim of $33 million out of the total amount it owed them.

This figure represents 3.3% of the $1 billion total loss incurred by the imploded crypto hedge fund following its demise in 2022.

Should the court grant its motion, Genesis stated that both parties must mutually release themselves from further liabilities or pledges arising from their brief two-year relationship.

Providing a ground for its reasons, the defunct blockchain-based asset lender argued that 3AC was one of its largest borrowers between 2020 and 2022.

The firm also stated that the $1 billion incurred debt against it was the largest asserted claim in the Chapter 11 cases linked with the collapse of the once popular FTX cryptocurrency exchange.

The document further explained that a go-ahead with the court would significantly smoothen the way for the final confirmation of Genesis’ Chapter 11 plan of reorganization, prompt distributions, eliminating risks, expenses, and uncertainty often involved in protracted legal cases.

However, the impact of this proposed settlement agreement extends beyond 3AC debtors.

According to Genesis, all debtors with claims to Avalanche’s AVAX and Near Protocol’s NEAR tokens will need to forfeit them in favor of settling 3AC’s debts.

This includes any claims or security interest gained when 3AC engaged with the crypto lender until its demise a couple of years later.

Providing more details on how the claims will be executed, Genesis revealed it would opt for a pro-rata distribution, with funds to be paid in cash. Nevertheless, 3AC debtors can choose any other payment method they deem fit.

In its motion, the crypto lender also chipped in its ongoing claims settlement with the Winklevoss Twins’ owned Gemini exchange.

However, Genesis clarified that these current claims do not cover the exchange’s claims but are part of its Genesis Bankruptcy Proceeding under the name tag “Genesis Plan.”

Gemini and other creditors have until November 24 to file objections, and the courts will consider the motion by November 30.

We Re-invested Despite 3AC Hit

The year 2022 proved challenging for the cryptocurrency market, marked by a series of setbacks.

Commencing with the collapse of the Terra blockchain, multiple blockchain protocols went under either due to poor management framework or massive funds loss due to cyberattacks.

However, the singular event that shook the nascent industry to its core was the abrupt collapse of the FTX exchange in November 2022.

This sudden event saw investors lose up to $8 billion in the crypto exchange’s collapse, making it impossible to withdraw their digital assets.

3AC, Genesis, and several other crypto players were part of the impacted funds. This led to the crypto hedge fund being unable to meet its $1.2 billion debt obligations to the Genesis Global Group.

With funds out of the door, several investors panicked, trying to recoup their losses.

However, two Genesis creditors revealed they opted to increase their investments in the crypto lender after receiving guarantees that investing is safer.

Two Genesis creditors say that after Genesis lost $1.1 billion due to 3AC defaulting on its loans and DCG had taken on that debt, they began to deposit more money with Genesis.

Here’s the sale pitch at least three creditors heard.

Full episode:

— Laura Shin (@laurashin) November 4, 2023

Speaking on an Unchained Crypto podcast, BJ and Branden recounted the Genesis team’s promise of actively mitigating risks, but the reality has not aligned with these assurances as investors await the return of their funds.

The post Bankrupt Crypto Lender Genesis Seeks Court Help to Reduce Settlement Payout to 3AC appeared first on Cryptonews.

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