Genesis must pay $3 billion in refunds to customers

Bankrupt cryptocurrency lending platform Genesis has won court approval to distribute $3 billion in cash and cryptocurrencies to its creditors. According to a recent filing, the bankruptcy court handling the case approved the company’s payment plan.

The value proposed by the company corresponds to 77% of the value of the claims made by customers. Furthermore, reimbursement will occur in stages, depending on how much each person declared to receive.

However, the Digital Currency Group (DCG) will not receive your payments in this first phase. The group is Genesis’ largest single creditor and is expected to enter into a separate agreement.

Payment structure

The announcement of the plan marks a breakthrough in the case of Genesis, which declared bankruptcy in 2022 shortly after the collapse of Earth (LUNA). The company blocked interest payments and then cryptocurrency withdrawals.

For almost two years, the market was skeptical about the possibility that Genesis would return the amounts. On Xclaim, a platform that quotes receivables, refund requests linked to Genesis were quoted at 35% of their value until January 2023.

As of today, Genesis claims for payments in Bitcoin (BTC) or Ethereum (ETH) are trading between 97% and 110% for claims above $10 million. Smaller sums (below US$1 million) are being negotiated between 74% and 94%.

Fiat currency or stablecoin payments on Genesis accounts are trading between 89% and 91% for accounts valued between $1 million and $10 million and between 73% and 88% for claims under $1 million. In other words, expectations that customers will receive their money have grown in the market.

Separate agreement

However, one creditor was left out of this list: DCG, which is the controller of Genesis and also of Grayscale. The company will not receive any payments under this plan.

“The record here clearly establishes that there is insufficient value in the debtors’ assets to provide DCG with recovery as a shareholder after paying creditors,” Judge Sean Lane wrote in the filing. “Given the size of the creditors’ claims, the DCG is left out of the plan.”

As for other payments, Genesis will make refunds based on the value of the cryptocurrencies starting in January 2023. Initially, it was hoped that this could lead to a full payment, including DCG, but the inclusion of the group proved unfeasible.

In the filing, Judge Lane noted that DCG assumed $1.1 billion of Genesis’ debt due to the collapse of Three Arrows Capital (3AC) with a 10-year promissory note, but this illiquid obligation did not cover the losses.

In November 2023, the two companies reached a repayment plan in which DCG would receive US$227.3 million, with a further US$275 million to be paid by April. The settlement ended a lawsuit worth more than $620 million.