Creditors of Genesis Global Capital (GGC), a crypto lender in bankruptcy, have raised concerns about a proposed $175 million deal with defunct exchange FTX, alleging that GGC engaged in vote-buying to manipulate the bankruptcy proceedings. These accusations pose another challenge for Genesis as it seeks to wind up its operations and repay former customers, media reports said.
Since filing for bankruptcy in January, GGC has been grappling with how to handle the outstanding debt of over a billion dollars owed by its parent company, Digital Currency Group (DCG). The tentative deal with FTX’s Alameda Research, which allows them to claim $175 million from the Genesis estate (a significant reduction from FTX’s initial claim of $4 billion), has not garnered unanimous support from other creditors, including Gemini, which is owed approximately $766 million by Genesis.
Gemini, among other creditors, voiced concerns that Genesis’ proposed settlement with FTX constitutes an attempt to manipulate the voting process required for bankruptcy plans. They argue that by entering into this settlement, Genesis is essentially buying the support of FTX and its votes, which they consider a perversion of the Chapter 11 bankruptcy process.
A spokesperson for Genesis did not provide an immediate response to CoinDesk’s request for comment. Genesis’ legal counsel has previously argued that the FTX deal would streamline the company’s restructuring without the expense of prolonged litigation.
Additionally, an “ad hoc” group of creditors characterized FTX’s attempts to recover loans from its “criminal enterprise” as unconscionable and criticized FTX’s strategy in pursuing billions from Genesis as unfocused and haphazard. While the members of this group have not been disclosed, they claim to represent a majority of each class of claims, with their members being owed a total of $2.4 billion by GGC.
Gemini and other creditors have previously opposed the DCG deal and suggested that Genesis should lose its exclusive rights to propose a wind-up plan. In July, Gemini also filed a lawsuit against DCG, alleging fraud by Genesis, allegations that DCG countered as defamatory and a mere publicity stunt.
