The insolvent lender granted additional time to submit a bankruptcy exit plan, now due by August 2
At a bankruptcy hearing on Monday, U.S. Bankruptcy Court Judge Sean Lane granted an extension to the mediation period between crypto lender Genesis and its creditors. The decision came as tensions escalated regarding the involvement of Genesis’ parent company, Digital Currency Group (DCG), in the lender’s restructuring process.
The previously scheduled mediation period, originally set to end last month, has been extended until June 16. On May 1, Judge Lane appointed a mediator to facilitate discussions between the insolvent lender and its creditors after prior negotiations between the parties had failed earlier this year.
During the hearing, Judge Lane expressed the complexity of the conversations involved in bankruptcies, stating, “There are various types of discussions that need to take place in relation to [bankruptcies].” He further acknowledged the inherent challenge of negotiating all aspects simultaneously, emphasizing that comprehensive negotiations can be a demanding task.
The decision by the judge to extend the mediation period drew frustration from certain Genesis creditors, including crypto exchange Gemini, who was previously a business partner of the lender. Genesis had filed for bankruptcy in January within the Southern District of New York.
Legal representatives representing Gemini contended that prolonging discussions among the involved parties could potentially cause more significant financial harm to those who have been most affected by the bankruptcy.
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Anson Frelinghuysen, a partner at Hughes Hubbard & Reed representing Gemini, emphasized the significance of considering the individuals affected by each delay, stating, “Gemini urges all parties involved to bear in mind that every delay directly impacts real people who are separated from their investments.
He further expressed concerns about the patience of Gemini, as well as its users of the Earn product, reaching a threshold. It’s worth noting that centralized cryptocurrency exchange Gemini had halted withdrawals from accounts associated with its crypto lending service, Gemini Earn, in November.
This action was taken after Genesis suspended its operations due to the collapse of one of its borrowers, crypto exchange FTX, which involved billions of dollars.
During the hearing, Gemini Earn customers, who have been adversely affected by Genesis’ financial difficulties, voiced their dissatisfaction with the judge’s choice to extend the mediation period of the case.
Clinton Mueller, one of the Gemini Earn customers, emphasized the urgency of the situation, stating, “We cannot afford the luxury of endless litigation. This case has tangible implications for our homes and families.”
While acknowledging the challenges faced by Genesis’ creditors, Judge Lane countered their assumptions that the mediation process’s timeline would unnecessarily prolong the court proceedings.
Judge Lane addressed the misconception that shortening the mediation period would expedite the overall case, stating, “Shortening the mediation does not shorten the case. Extending the mediation process often leads to a more prompt resolution of the case.
Furthermore, during the hearing, the judge rejected requests to include bankrupt crypto exchange FTX in the settlement talks.
FTX claims that Genesis owes them $3.9 billion. Instead, Judge Lane granted additional time for the case’s parties to develop a revised proposal that would outline the distribution of funds to the numerous creditors of Genesis, which amount to hundreds of thousands of individuals.
Genesis, on its part, asserts that it does not have any outstanding debts to FTX. The lender has formally requested the judge overseeing the case to determine the precise amount that FTX claims to be owed.
This matter is scheduled to be addressed in the upcoming hearing next week. It is worth noting that in a previous attempt, Genesis sought to have FTX’s claims, which have yet to be settled, evaluated as having no value.
Important: This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.
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