DCG, the parent company of crypto lender Genesis Global Capital, has objected in bankruptcy court against a proposed settlement agreement between Genesis and the New York Attorney General’s (NYAG) office.
The agreement was reached earlier this month as part of the NYAG’s lawsuit alleging Genesis defrauded investors. Under the terms, Genesis would cease current and future business activities in New York to resolve the NYAG’s claims.
In its objection, DCG argues the agreement violates bankruptcy law by taking value from lower-priority creditors and redistributing it to preferred creditors against the priority rules. DCG claims this attempts to circumvent the bankruptcy process and improperly favor some creditors over others.
The objection states that even if the current Chapter 11 reorganization plan is not approved, the NYAG agreement would still allow unsecured creditors to recover based on current asset values rather than values when Genesis filed for bankruptcy in January 2023.
DCG contends that bankruptcy law requires recoveries to be based on petition-date values, not distribution-date values, so the proposed agreement violates those requirements.
The NY Attorney General’s office sued DCG, Genesis, and Gemini over allegations of fraudulent schemes related to the Gemini Earn product. Genesis disputed the claims but negotiated a proposed settlement agreement with the NYAG in early February.
DCG maintains the claims are meritless but argues the proposed settlement subverts bankruptcy law priorities. A bankruptcy court judge must approve any settlement agreements in the Genesis reorganization case.
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