- DCG is objecting to Genesis’ settlement deal with the NYAG.
- Genesis’ settlement with the NYAG only benefits unsecured creditors.
- The venture capitalist asserts that Genesis’ agreement violates the Bankruptcy Code.
Earlier in February, defunct crypto lender Genesis, a subsidiary of the Digital Currency Group (DCG), moved to close its tumultuous legal saga by agreeing to settle with the New York Attorney General’s office , which alleged the firm and its collaborators jointly defrauded investors for over $3 billion.
However, in a surprising turn of events, with the development still fresh, the crypto lender’s parent company, DCG, has contested the settlement, citing that it has many ‘deficiencies.’
DCG Objects
In a court filing dated February 21 , DCG objected to the settlement reached by its bankrupt subsidiary, crypto lender Genesis, with the New York Attorney General’s Office.
The objection, only available in redacted form, highlights that the settlement violates the Bankruptcy code by pegging payments to asset prices as of the distribution date instead of the petition date.
DCG underscored in its objection that the United States Supreme Court rules against a settlement violating the Bankruptcy Code.
Additionally, the venture capitalist contends that the settlement unfairly benefits the NYAG and unsecured creditors , with all residual value left in the Debtors’ estate after Genesis pays its creditors. DCG emphasized that this would rob the firm of a fair opportunity to participate in the waterfall under the Debtors’ plan as a creditor and an equity holder.
Interestingly, Genesis’ settlement with NYAG doesn’t benefit the venture capitalist as it is a secured creditor. As DCG holds the sole equity in Genesis, it qualifies as a secured creditor, meaning that the venture capitalist’s debt is ‘secured’ by collateral. In contrast, unsecured creditors don’t have collateral against the debt the debtor owes them.
DCG concludes its objection by asserting that the deficiencies in the settlement indicate a lack of consideration for the possibility of prevailing against NYAG’s claims in court and urges the court to withhold approval of the settlement until its objections are addressed.
On the Flipside
- Per the Bankruptcy code, FTX will value creditors’ digital assets in cash at November 2022 rates. This means the exchange will pay users $16,000 for 1 Bitcoin instead of $52,000.
- While a settlement with Genesis was reported earlier, the NYAG’s update does not mention it.
- The SEC has also taken action against Genesis, securing a conditional $21 million settlement . This fine will only be imposed if Genesis fails to compensate its customers.
Why This Matters
The settlement initially represented a significant milestone for Genesis and its creditors; however, DCG’s objection could introduce another layer of complexity as the lender navigates its bankruptcy proceedings.
Learn how USDC’s exit from Tron could affect you:
Here’s What Circle Pulling USDC from Tron Means for You Catch up on Cardano’s price analysis:
Cardano (ADA) Slips Under $0.6 As Market Backtracks on Gains
