Digital Currency Group (DCG) has filed an objection to a recent settlement agreement between its bankrupt subsidiary, Genesis, and the New York Attorney General’s Office (NYAG).
The objection, submitted on Feb. 21, raises concerns about the settlement’s adherence to the Bankruptcy Code and its implications for the rights of DCG as a creditor and equity holder.
DCG’s objections
Genesis recently reached a settlement with the NYAG that includes a payment plan for unsecured creditors based on asset valuation at the time of distribution.
However, DCG’s objection highlights a departure from standard bankruptcy procedures, which typically base such payments on the valuation at the petition date. The Supreme Court has previously ruled that settlements cannot contravene the Bankruptcy Code, a stance DCG emphasizes in its filing.
The company argues that the settlement unfairly prioritizes unsecured creditors at the expense of secured creditors and equity holders like DCG, potentially depriving them of a fair opportunity to recover their investments.
According to the filing:
“By allocating all residual value in the debtors’ estates to unsecured creditors, the settlement undermines the equitable treatment of all stakeholders, including DCG.”
DCG, as the sole equity holder in Genesis, asserts its status as a secured creditor and insists that the settlement arrangement was concocted without due consideration of all creditors’ rights.
DCG’s objection also criticizes the settlement for being negotiated in secrecy and hastily, without a thorough evaluation of the merits of the claims or an attempt to maximize the value of the estate for all involved parties.
The firm has requested that the court delay approval of the settlement until its concerns are fully addressed.
NYAG lawsuit
New York Attorney General Letitia James initially filed the lawsuit in October 2023 over allegations that Genesis, along with DCG and its CEO Barry Silbert, had engaged in fraudulent activities that misled investors and concealed significant financial losses.
Following additional complaints, the NYAG filed an amended complaint earlier this month, alleging that these entities defrauded investors out of an additional $2 billion, bringing the total to more than $3 billion in losses for over 230,000 investors.
Genesis reportedly reached a settlement agreement with the NYAG in early February, around the same time as the complaint was amended. The company has also settled the SEC lawsuit over similar allegations related to its Gemini Earn program.
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- Source: https://cryptoslate.com/dcg-files-objection-to-genesis-nyag-settlement/
