FTX filed a motion in a Delaware court on February 1 to sell its $175 million claim against bankrupt digital financial services company Genesis Global Capital. The claim was first made by Alameda Research, a hedge fund linked to bankrupt cryptocurrency exchange FTX.
If the motion is granted, FTX may sell all or part of the claim at another time to take advantage of favorable terms. Current claims on Genesis are selling for 65% of face value, much higher than the 38% claimed by Alameda Research.
This motion also requests approval of sales procedures that apply to all sales, reducing the cost and delay of filing a separate motion for each proposed sale. The proposed sale order provides that the sale price must be at least 95% of the highest price quoted by the primary market maker for Genesis Global Capital’s general unsecured claims as of the record date within three days of the sale.
Appeals against the sale of title can be made until February 15.
FTX originally sought to recover $3.9 billion from Genesis last May, as allowed under bankruptcy law. However, the claim was later negotiated to $175 million between FTX and Genesis in August and approved by the court in October. FTX’s other claims against Genesis were expunged at that time.
The reduction in the claim amount was justified by both parties on the basis that the likelihood of recovery could not be predicted, and the settlement helped avoid protracted and costly litigation with unpredictable consequences.
FTX experienced collapse in November 2022 after irregularities were discovered in its books. At the time, Genesis had $175 million tied up in its FTX account, but said this did not impact its market-making activities.
Genesis Global Capital, a subsidiary of Digital Currency Group (DCG), filed for bankruptcy in January 2023, entering into a long-term dispute with the Gemini cryptocurrency exchange. Genesis took control of the Gemini Earn program, which was affected by suspending withdrawals. On February 1, Genesis reached a $21 million settlement with the U.S. Securities and Exchange Commission regarding Gemini Earn.
A court hearing is scheduled for February 14 in New York to consider Genesis Debtors’ proposed bankruptcy recovery plan, including the SEC settlement.