DCG Challenges Genesis Capital’s Bankruptcy Plan for Overcompensation

DCG opposes Genesis Global Capital’s bankruptcy plan, citing legal violations and ethical concerns about asset valuation and creditor compensation in the volatile crypto market.

Digital Currency Group (DCG) has voiced strong opposition to the bankruptcy plan proposed by its subsidiary, Genesis Global Capital, arguing that the plan violates the Bankruptcy Code by purporting to compensate overcompensation to customers. DCG’s main claim is that Genesis’ plan proposes to pay its customers and unsecured creditors significantly more than they are legally entitled to, specifically criticizing the plan for offering “additional payments” based on the current value of digital assets such as Bitcoin and Ethereum, which have appreciated since Genesis filed for bankruptcy in January 2023.​​​​

DCG has made it clear that it supports paying off creditors in full, but insists that any payout must not exceed the value of the crypto assets at the time of the bankruptcy filing. The company emphasizes that the proposed plan unfairly favors a select group of creditors at the expense of others, including DCG, by offering them additional payouts that reflect the current, higher value of the digital assets, rather than their value at the time of filing. This approach, according to DCG, not only violates US bankruptcy laws, but also deprives DCG of basic economic and corporate governance rights.​​​​

Furthermore, DCG’s opposition is rooted in a broader concern about the fair treatment of all creditors and the observance of legal standards within insolvency proceedings. The company has filed a petition urging the court not to approve Genesis’ plan, arguing that it is illegal and demonstrates a lack of good faith in the restructuring process.

Genesis has been struggling to deal with its financial woes since the 2022 crypto market crash that led to it filing for bankruptcy in early 2023 with more than $3.5 billion owed to its biggest creditors. The bankruptcy saga has been complicated by legal challenges, including a significant settlement with the US Securities and Exchange Commission (SEC) and ongoing disputes with DCG and Gemini, its former business partner.

This dispute highlights the complex dynamics between parent companies and their subsidiaries in the cryptocurrency sector, particularly in the context of bankruptcy and asset valuation. The outcome of this disagreement could set a precedent for how crypto assets are valued and how creditors are compensated in upcoming bankruptcy cases.

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