In order to avoid the uncertainty and delay of litigation, the bankrupt firms reduced the amount from a much higher debt.
On February 1st, FTX submitted a move to a Delaware court to sell its claim against the bankrupt digital financial services company Genesis Global Capital for $175 million. The hedge fund connected to the defunct bitcoin exchange, Alameda Research, made the assertion.
Should the claim be authorised, FTX is free to sell it all or in part, whenever it suits them best. The current selling price of claims against Genesis is 65% of their face value, which is far more than the 38% that Alameda Research claims are obtaining.
In order to “alleviate the cost and delay of filing a separate motion for each proposed Sale,” the motion requests adoption of a sales procedure that will be applied to all transactions. Within three days of the selling date, the sale price must equal, at minimum, 95% of “the highest price quoted by one or more leading market-makers for general unsecured claims of GGC on a reference date.” According to the suggested sale order:
“It is in the best interests of the Debtors and their estates, creditors, holders of interest, and all other interested parties to enter into this Order.”By February 15th, objections to the claim’s sale may be filed.
In May 2023, FTX attempted to reclaim $3.9 billion from Genesis, as allowed by bankruptcy legislation. In August 2023, FTX and Genesis negotiated the $175 million claim, which the court approved in October. FTX’s other allegations against Genesis were then dropped.Arguments that the settlement avoided protracted and expensive litigation, the result of which would likewise be unclear, and the unpredictable nature of the prospective recoveries were used by the parties to justify the drastically reduced amount.
Following the discovery of anomalies in its account books, FTX folded in November 2022. Genesis claimed that its market-making operations were unaffected by the $175 million that was locked up in its FTX account at the time.
A protracted legal dispute with the Gemini cryptocurrency exchange began in January 2023 when Genesis, a division of the Digital Currency Group, filed for bankruptcy. The Gemini Earn programme, which Genesis oversaw, suffered when Genesis stopped accepting withdrawals. On February 1st, Genesis and the US Securities and Exchange Commission negotiated a $21 million settlement with Gemini Earn.
The Genesis debtors’ proposed bankruptcy reorganisation plan and its inclusion of the SEC settlement will be discussed in court on February 14 in New York.