In a surprising twist to the ongoing bankruptcy proceedings involving cryptocurrency exchange FTX and crypto lender Genesis, FTX debtors have lodged an objection to Genesis’ estimation that they are entitled to claims totaling “$0.00.” The objection was filed in the United States Bankruptcy Court for the Southern District of New York on June 2, just one day after Genesis submitted their estimation procedures motion, media reports said.
FTX debtors had voiced dissatisfaction with the lack of involvement in the mediation process and the absence of advance notice before Genesis filed the motion. Disputing Genesis’ statement suggesting they were kept informed throughout the proceedings, FTX debtors expressed surprise at the sudden claim of no entitlement.
Interestingly, as recently as May 3, lawyers representing FTX had sought nearly $4 billion from Genesis, invoking bankruptcy laws that permit the recovery of “avoidable transfers” made within 90 days before a company declares bankruptcy. The sudden shift from seeking substantial compensation to contesting the claim of no entitlement has perplexed many.
In response to these developments, FTX debtors have submitted a motion requesting relief from the automatic suspension on legal proceedings against Genesis, which is a standard procedure when a company files for bankruptcy. The court is scheduled to hear this motion on June 15, shedding light on the future trajectory of the bankruptcy case.
Adding to the complexities, Genesis’ parent company, the Digital Currency Group (DCG), recently announced that it had no viable solution to address its outstanding intercompany obligations, leaving creditors in a challenging position. During this period, DCG engaged in mediation with Genesis to address the demands of creditors.
The situation took an unexpected turn when FTX objected to Genesis’ estimation, raising further questions about the resolution of the bankruptcy proceedings.
Back in February, FTX had proposed a settlement plan, envisioning an 80% recovery of funds for Genesis creditors following the company’s Chapter 11 bankruptcy filing. However, with the recent objection from FTX debtors and the uncertainty surrounding intercompany obligations, the prospects of such a settlement seem uncertain.
As the court prepares to hear the motion for relief from the automatic stay, all eyes will be on the proceedings on June 15. The outcome of this hearing will have significant implications for the bankruptcy case, potentially reshaping the future of both FTX and Genesis while impacting the wider cryptocurrency industry.
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