The insolvency proceeding for the troubled crypto currency lender Genesis will get underway today in the Southern District of New York.
The documents filed with the court indicate (1) that the first session for the bankruptcy proceedings involving crypto currency lender Genesis Capital will take place on January 23.
What to Expect in the Hearing?
The judge will first consider various options before proceeding with the bankruptcy hearing for Genesis. Among these is whether or not to grant Genesis Global Holdco & two of its mortgage lender subsidiaries the Chapter 11 relief they requested. Genesis Global Capital & Genesis Asia Pacific are the names of two corporate entities collectively referred to as Genesis Capital.
In addition, the firms demanded that the cases be jointly administered. Companies can continue commercial activities while presenting restructuring plans to creditors if they file for bankruptcy under Chapter 11 of the United States Code.
As part of the bankruptcy procedures, the United States Trustee would create a panel for unsecured creditors to represent their interests. Before making significant choices, this panel would also have the authority to insist that the impacted businesses be questioned and kept in the loop about the situation.
The Reason for the Bankruptcy Filling
On January 19, Genesis submitted a petition for protection under bankruptcy laws, alleging potential liabilities of up to $10 billion.
The collapse of the cryptocurrency lender occurred during the most recent FTX-fueled wave of contagion in the cryptocurrency market.
At the beginning of November, FTX collapsed, taking around 175 million dollars worth of Genesis' crypto currency investment. This was a devastating blow to the crypto currency lender.
Genesis Global Capital halted withdrawals from its platform a few days following the collapse of the cryptocurrency exchange in the Bahamas.
During that period, the firm gave some indication of the subsequent steps that it would take in the wake of the redemption suspension, saying:
"To investigate all the opportunities available, we have secured the services of the most qualified consultants in the field. We will provide a proposal for the loan business the following week. We are putting in a lot of effort to find the most effective answers for the lending industry's problems, which includes, among other things, locating new sources of liquidity.
Even though Genesis filed for bankruptcy in January 2023, two of the company's subsidiaries were unaffected. Genesis' organization that provides derivatives and custody services, in addition to its Global Trading business, both continuing to function in the same manner as before.
Paul Aronzon, an independent director of Genesis, offered the following explanation when asked to comment on the likelihood of the firm making progress despite its ongoing insolvency crisis:
"We have established a deliberate approach and roadmap via which we feel we can arrive at the greatest answer for clients and other stakeholders," the statement reads.
"As we work to implement a strategy that will maximize value and create the best possibility for our company to emerge well-positioned for the future, we look forward to continuing our engagement with DCG and the consultants we have retained on behalf of our creditors."
Genesis has also said that it anticipates having sufficient cash left over after the restructuring procedure has been completed to repay its unpaid creditors. In addition, the company's Chapter 11 strategy endeavors to provide a comprehensive solution to all of the claims. In addition, Genesis intends to establish a trust that would be responsible for the distribution of assets to creditors.