On February 1, cryptocurrency exchange FTX filed a motion in a Delaware court seeking approval to sell its $175 million claim against bankrupt digital financial services company Genesis Global Capital. The claim initially belonged to Alameda Research, a hedge fund associated with the bankrupt cryptocurrency exchange. If approved, FTX may choose to sell all or part of the claim at different times to capitalize on favorable market conditions. Currently, claims against Genesis are trading at 65% of their face value, significantly higher than the 38% at which Alameda Research held its claims.
The motion seeks court approval for a sales process that would be applicable to all sales, aiming to streamline the procedure and avoid the need for separate motions for each proposed sale. The proposed sale price must be at least 95% of the highest quoted price by leading market makers for Genesis Global Capital's general unsecured claims on the reference date within three days of the sale. The motion argues that such a sales process is in the best interests of the debtors, their estates, creditors, interest holders, and all other concerned parties.
FTX initially sought to recover $3.9 billion from Genesis in May 2023, leveraging bankruptcy laws. However, in August 2023, a settlement was negotiated between FTX and Genesis, resulting in the $175 million claim, which was approved by the court in October. Other accusations by FTX against Genesis were dropped at that time. Both parties defended the significant reduction, citing the unpredictability of recovery likelihood and the desire to avoid protracted and costly litigation with an uncertain outcome. FTX faced challenges in November 2022 after irregularities were uncovered in its financial records.
Genesis Global Capital, a subsidiary of Digital Currency Group, filed for bankruptcy in January 2023, leading to a prolonged conflict with the Gemini cryptocurrency exchange. The bankruptcy reorganization plan proposed by Genesis debtors will be considered in a court hearing scheduled for February 14 in New York. Additionally, the hearing will address whether the SEC settlement agreement, involving a $21 million settlement with Gemini Earn, is included in the proposed plan.
