HomeStock MarketGenesis warns NY AG lawsuit may lead to bankruptcy liquidation; settlement unlikely.

Genesis warns NY AG lawsuit may lead to bankruptcy liquidation; settlement unlikely.

Crypto lender Genesis Global faces bankruptcy liquidation amid New York civil fraud lawsuit

Genesis Global risks bankruptcy liquidation

Crypto lender Genesis Global is facing the possibility of bankruptcy liquidation due to a civil fraud lawsuit filed by New York Attorney General Letitia James. The lawsuit alleges that Genesis Global, its parent company Digital Currency Group (DCG), and former partner Gemini Trust Co defrauded investors of over $1 billion through their joint investment program, Gemini Earn. If the lawsuit is successful, it could result in a bankruptcy liquidation that does not resolve Genesis Global’s claims against DCG.

Genesis Global’s alternative bankruptcy plan

Rather than waiting for the outcome of the lawsuit, Genesis Global intends to propose a “no deal” bankruptcy plan. This plan aims to distribute available crypto assets to customers and establish a process to preserve litigation claims against DCG and others. According to Genesis attorney Sean O’Neal, this decision was forced upon them by the New York Attorney General’s complaint, and while it is not an easy choice, it is an obvious one.

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Genesis Global’s belief in a better outcome

Although Genesis Global believes that creditors would benefit more from a bankruptcy plan that includes a settlement with DCG, time is running out to finalize such a plan. DCG spokesperson stated that they will continue engaging in settlement talks in hopes of reaching a better outcome for Genesis Global’s creditors. However, they are fully prepared to defend and win if forced to litigate Genesis Global’s claims.

Gemini’s previous legal battle and Genesis Global’s bankruptcy filing

Gemini, known for the legal battle fought by its founders, the Winklevoss twins, against Meta Platforms CEO Mark Zuckerberg, had previously sued DCG over the failure of their crypto lending partnership. Genesis Global filed for bankruptcy in January following the collapse of key counterparties, including FTX, which led to the freezing of customer redemptions in November 2022.

Despite the challenging situation, Genesis Global remains committed to finding a resolution that benefits its creditors while navigating the legal complexities of the New York civil fraud lawsuit.

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