FTX has filed in Delaware court to sell a $175 million claim against bankrupt Genesis Global Capital, with the goal of optimizing returns from the sale. The move is part of FTX’s wider strategy to manage financial recovery following the collapse, with the proposed sale proceeding designed to maximize value from the claim amid Genesis’ ongoing legal and financial challenges.
FTX initiated a significant legal maneuver by filing in a Delaware court to sell its $175 million claim against Genesis Global Capital. This action comes after Genesis Global Capital filed for bankruptcy, with FTX and its related hedge fund Alameda Research directly affected. The lawsuit, originally filed by Alameda Research, is part of FTX’s broader strategy to navigate its financial recovery after the collapse. FTX’s move to sell the claim, in whole or in part and potentially in various cases, is intended to optimize market conditions to maximize returns from the sale.
Claims against Genesis are currently trading at 65% of their face value, a figure significantly higher than the 38% value attributed to Alameda Research’s claims. FTX’s proposal outlines a proposed sale procedure designed to streamline the process by ensuring that the sale price is no less than 95% of the highest quoted price from leading market makers for Genesis Global Capital’s total unsecured receivables under a certain period of time around the date of sale. This strategic decision underscores FTX’s intent to alleviate the financial complications and delays typically associated with the sale of such claims, highlighting the rationale for the proposal as being in the best interest of all parties involved, including debtors, creditors and other stakeholders.
The background to this proposal is FTX’s initial efforts to recoup $3.9 billion from Genesis under bankruptcy law provisions, an amount that was later negotiated down to $175 million in a settlement reached between the two entities in August 2023 and approved by court in October of the same year. That settlement effectively extinguished other claims FTX had against Genesis, with both sides citing the unpredictable nature of potential recoveries and a desire to avoid lengthy and expensive litigation as key reasons for the reduced claim amount.
This development is part of a larger narrative involving the collapse of FTX in November 2022 due to accounting irregularities, which sent shockwaves through the cryptocurrency market. Genesis Global Capital, with $175 million tied up in FTX accounts at the time, insisted it had not affected its market-making activities. However, Genesis’ own bankruptcy filing in January 2023 and subsequent legal entanglements, particularly with the Gemini cryptocurrency exchange over the Gemini Earn program, further complicate the situation. Genesis’ recent $21 million settlement with the SEC in matters related to Gemini Earn is a critical element in the ongoing bankruptcy reorganization effort.
A court hearing scheduled for February 14 in New York will be a key moment as it will consider the inclusion of the SEC settlement in Genesis’ proposed bankruptcy reorganization plan. This hearing represents a significant step in the unfolding legal drama surrounding Genesis Global Capital’s bankruptcy and its broader implications for the cryptocurrency industry.
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