Key Takeaways
- Judge has also expunged multiple claims by the FTX debtors against Genesis
- Genesis debtors are officially authorized to now pay $175 million to FTX.
A significant development has unfolded in the cryptocurrency industry as Genesis Global Capital’s bankruptcy estate moves closer to putting its settlement agreement with the now-defunct crypto exchange FTX into action.
The proposed order to implement this agreement was recently submitted to the U.S. Bankruptcy Court for the Southern District of New York, following a decision by Judge Sean H. Lane on October 6, in which he approved the deal between Genesis and FTX, effectively resolving the claims between these two entities.
In New York’s bankruptcy court, the approval by Judge Lane paves the way for the settlement between bankrupt cryptocurrency firms FTX and Genesis Global Trading (GGC). This approval enables FTX-affiliated Alameda Research to receive $175 million from GGC. Consequently, Genesis is now officially authorized to carry out the terms of the settlement, which includes making a payment of $175 million to FTX.
Judge Lane’s decision also results in the removal of multiple claims made by FTX debtors against Genesis. Notably, this settlement marks a substantial reduction from the original amount claimed by FTX debtors, who collectively asserted claims totaling around $3.9 billion in May 2023. These claims encompass various elements, including approximately $1.8 billion in alleged loan repayments by Alameda to GGC, $1.6 billion in assets supposedly withdrawn by the Genesis debtors from FTX, and other assets.
Genesis had previously voiced its belief in the fairness and equity of the settlement, emphasizing that it would enable the company to avoid prolonged litigation, which inherently carries uncertainties. However, on the other side, FTX creditors had expressed their discontent and urged the Official Committee of Unsecured Creditors of FTX to challenge the agreement in August 2023.
Under the terms of the settlement, FTX’s allowed bankruptcy claim stands at $175 million against Genesis, rooted in loans provided by Genesis to FTX affiliate Alameda Research. This move comes in exchange for FTX agreeing to withdraw several other substantial claims against Genesis, potentially amounting to over $1 billion.
Genesis’s Chapter 11 bankruptcy filing in January followed the turmoil triggered by FTX’s collapse, leading to mass customer withdrawals. The close association between Genesis and FTX is underscored by the fact that Genesis Global Capital lent over $2.8 billion to Alameda. The primary objective of the settlement is to resolve disputes related to the repayment of these loans, and the size of FTX’s allowed claim implies that Genesis will likely pay only a fraction of the initially loaned amount to Alameda.
Genesis initially sought approval for the settlement in August, but it faced objections from major creditors like Gemini Trust and an ad hoc group of Genesis lenders who were dissatisfied with the terms.
After evidentiary hearings in September, Judge Lane overruled the objections in an October 6 decision, deeming the deal reasonable, considering the litigation risks and the potential for more substantial losses if FTX’s claims remained unresolved.
While the proposed order filed on Thursday takes a step towards the implementation of the settlement, it still awaits Judge Lane’s approval
