DCG opposes Genesis Global Capital’s bankruptcy plan, citing legal violations and ethical concerns about asset valuation and creditor compensation in the volatile cryptocurrency market.
Digital Currency Group (DCG) expressed strong opposition to the bankruptcy plan proposed by its subsidiary Genesis Global Capital, arguing that it violates bankruptcy laws by intending to overcompensate customers. DCG’s main argument is that Genesis’ plan proposes paying customers and unsecured creditors significantly more than they are legally entitled to receive. It specifically criticizes plans to offer “additional payouts” based on the current value of digital assets such as Bitcoin and Ethereum. The value has risen since Genesis filed for bankruptcy in January 2023..
DCG made it clear that it would support full repayment to creditors, but insisted that repayment should not exceed the value of the cryptocurrency assets at the time of filing for bankruptcy. The company highlights that the proposed plan unfairly benefits one group of creditors at the expense of others, including DCG, by providing for additional payments that reflect the current higher value of the digital assets rather than their value at the time of application. According to DCG, this approach not only violates U.S. bankruptcy law, but also deprives DCG of essential economic and corporate control..
Moreover, DCG’s opposition is rooted in broader concerns about the fair treatment of all creditors and compliance with legal standards within insolvency proceedings. The company filed a motion urging the court not to approve Genesis’ plan because it was illegal and lacked good faith in the restructuring process.
Genesis has been struggling to navigate financial difficulties following the 2022 cryptocurrency market downturn, which led it to file for bankruptcy in early 2023, owing more than $3.5 billion to its top creditors. The bankruptcy case was complicated by legal challenges, including a significant settlement with the U.S. Securities and Exchange Commission (SEC) and ongoing disputes with DCG and former business partner Gemini.
The dispute highlights the complex dynamics between parents and subsidiaries in the cryptocurrency sector, particularly in terms of bankruptcy and asset valuation. The result of this discrepancy could set a precedent for how cryptocurrency assets are valued and creditors compensated in future bankruptcy cases.
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