Creditors Accuse Crypto Lender, Genesis of Vote Buying, as Bankruptcy Proceedings Continue

New York City, NY – Creditors of Genesis Global Capital (GGC), a crypto lender currently navigating bankruptcy proceedings, have voiced serious concerns over a proposed $175 million deal involving the collapsed exchange, FTX.

Accusations of vote-buying and manipulation have surfaced, creating uncertainty over the company’s efforts to resolve its financial affairs and return funds to former clients.

Genesis Global Capital has been grappling with its financial woes since filing for bankruptcy in January. Central to the dispute is how to handle the staggering debt owed to it by its parent company, Digital Currency Group (DCG).

FTX’s Claim and Controversy

In a legal development filed jointly by the two bankrupt entities in mid-August, FTX’s Alameda Research laid claim to $175 million from the Genesis estate. This figure is a significant reduction from FTX’s initial request for $4 billion, yet it has failed to garner approval from other creditors.

Gemini, a cryptocurrency exchange owed a substantial $766 million by Genesis, did not mince words when criticizing the proposed settlement.

In a filing made late on a Thursday evening, Gemini characterized the deal as an attempt to manipulate the bankruptcy process through a “sweetheart pre-plan deal.” Gemini vehemently contended that the proposal should not be accepted at face value.

Accusations of Ballot-Stuffing

The heart of the matter lies in the voting process for bankruptcy plans, where creditors are expected to vote in accordance with their claims. In light of the allegations, creditors are effectively accusing Genesis of engaging in ballot-stuffing, a tactic that undermines the integrity of the Chapter 11 bankruptcy process.

Another group of creditors echoed these concerns. They argued that Genesis had embarked on a mission to purchase the support of the FTX Debtors, essentially buying their votes. They emphasized that such actions constitute a perversion of the Chapter 11 process.

Genesis’ Response and Legal Tangle

Despite the growing controversy, a spokesperson for Genesis has yet to respond to requests for comment.

Adding to the complexity of the situation is an “ad hoc” group of creditors who deemed FTX’s attempts to recoup loans from Genesis as “unconscionable.”

They criticized FTX‘s strategy as no more than a shot in the dark, likening it to “throwing spaghetti against the wall to see what sticks.”

While this group has not disclosed its membership, they assert that they are collectively owed a staggering $2.4 billion by GGC, making them a majority in each class of claims.

Notably, Gemini and several other creditors have previously opposed the DCG deal and argued that Genesis should be stripped of its monopoly rights to propose a wind-up plan.

In a dramatic turn of events, Gemini filed a lawsuit against DCG in July, alleging fraud by Genesis. In response, DCG described these allegations as “defamatory” and a mere “publicity stunt.”

The fate of the Genesis-FTX deal now rests in the hands of Bankruptcy Judge Sean Lane, who is scheduled to preside over the matter at a hearing on September 6 in the Southern District of New York.

The outcome of this hearing will likely play a crucial role in determining the future of Genesis Global Capital and its ongoing efforts to emerge from bankruptcy.

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