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On Friday, the court granted permission to crypto lender Genesis Global to return approximately $3 billion in cash and cryptocurrency to its customers as part of its bankruptcy liquidation. This decision leaves its parent company, Digital Currency Group (DCG), with no recovery from the bankruptcy proceedings.

U.S. Bankruptcy Judge Sean Lane approved Genesis’ Chapter 11 liquidation plan, dismissing an objection from DCG. DCG had argued that Genesis should only pay customers and creditors based on the cryptocurrency values from January 2023, when Genesis filed for bankruptcy.

Since the bankruptcy filing, cryptocurrency prices have increased significantly. For instance, Bitcoin was priced at $21,084 in January 2023 and has now soared to $67,000. The disagreement between DCG and Genesis centered on who should benefit from this increase in prices.

Judge Lane rejected DCG’s argument, ruling that even if customer claims were based on the lower January 2023 prices, Genesis still had substantial debts to pay. These debts include $32 billion in claims from various creditors, including federal and state financial regulators, which must be settled before any funds could be returned to DCG.

Lane emphasized that there were insufficient assets to provide any recovery to DCG. Genesis is attempting to repay its customers with cryptocurrency where possible, but it doesn’t have enough to cover all its debts.

Genesis’ attorney, Sean O’Neal, clarified on Friday that the company did not agree with DCG’s view that customers could be fully compensated based on the lower cryptocurrency values from January 2023. “We don’t buy into the idea that claims are capped at the petition date value,” O’Neal stated.

In February, Genesis estimated that it would be able to repay up to 77% of the value of its customers’ claims, depending on future cryptocurrency price changes. This highlights the ongoing challenge of navigating repayments in a highly volatile market.

DCG could not be reached for comment late Friday.

This case highlights the complexities involved in bankruptcy proceedings, especially in the volatile world of cryptocurrencies. The sharp rise in crypto prices since Genesis’ bankruptcy filing created a contentious issue between Genesis and its parent company, DCG. However, the court’s ruling underscores the principle that creditors’ claims take precedence, and equity owners like DCG are last in line for any recovery.

In summary, Genesis Global has been ordered to prioritize paying back its customers and other creditors before considering any claims from its equity owner, DCG. Despite the significant rise in cryptocurrency prices, the court has made it clear that the priority is to settle the extensive claims from regulators and other creditors first. This decision ensures a fair process and upholds the fundamental principles of bankruptcy law.