Genesis, a crypto lender that declared bankruptcy earlier this year, and its parent company, Digital Currency Group (DCG), have struck a settlement deal in their current legal dispute.
If approved by the creditors, this agreement could conclude a lawsuit aimed at recovering $620 million from DCG, according to a recent bankruptcy filing.
Genesis filed legal action against DCG in September, alleging that the parent company wrongfully held over $620 million in loans. This lawsuit was part of Genesis’ broader bankruptcy proceedings to repay owed creditors.
To date, DCG has repaid approximately $227m of the total debt.
A new filing on 28 November with the United States Bankruptcy Court for the Southern District of New York revealed that DCG has agreed to repay the remaining $324m by April 2024.
This arrangement allows Genesis to follow up on any unpaid amounts. Genesis also said in the recent filing that the deal “will provide immediate significant and near-term benefits to GGC and its creditors, without the risk, expense, and diversion of resources that would be required by litigation”.
Lawsuit against DCG
The lawsuit against DCG stemmed from a loan agreement dating back to 2019. Under this agreement, Genesis, also known as GGC, loaned DCG 18,697.7 Bitcoin ($BTC).
The outstanding balance of this loan was later converted to a fixed-term loan due in May 2023. Although partially repaid, a balance of 4,550.5 BTC remained.
Genesis declared bankruptcy in January, following a suspension of withdrawals and new loan activities in November, as well as a reduction in staff leading up to the bankruptcy filing. The company owes approximately $3.5 billion to its top 50 creditors.
The settlement with DCG involves repaying the outstanding amount of the loan back to Genesis.
This would resolve the debt without resorting to lengthy and costly legal proceedings.
The agreement is part of Genesis’ plan to repay its creditors, which will be voted on before being presented to Judge Sean Lean for a final decision.
Genesis entangled in more legal Issues
Meanwhile, Genesis and cryptocurrency exchange Gemini are facing a lawsuit from the U.S. Securities and Exchange Commission (SEC). The SEC alleges that they sold unregistered securities through the “Earn” program, launched in February 2021. This program was a collaboration between Genesis and Gemini, allowing Gemini customers to loan their crypto to Genesis with the promise of repayment with interest.
The SEC claims that this Earn program should have been registered as a security offering.
Additionally, New York’s Attorney General has filed a lawsuit against these firms for allegedly defrauding investors in the same investment program. According to the Attorney General Letitia James, the companies are accused of defrauding over 23,000 investors of more than $1 billion.
