The dispute between bankrupt cryptocurrency exchange FTX and the insolvent crypto lender Genesis has intensified, with FTX now contesting Genesis’ claim that FTX is entitled to zero reimbursement. Just last month, FTX was seeking nearly $4 billion from Genesis as part of their respective bankruptcy proceedings.
In a recent court filing in the New York Bankruptcy Court, FTX debtors raised objections to Genesis’ estimation that their claims amounted to nothing. FTX debtors alleged that they were not given any advanced notice nor were they involved in the mediation process before Genesis filed its estimation procedures motion, in which it proposed a null claim.
The FTX debtors deny the assertion by Genesis that they were kept informed throughout the proceedings. They contest the assertion in Genesis’ motion that they were working swiftly with all interested parties to draft a plan structure. FTX stresses that, as the largest unsecured creditors in Genesis’ Chapter 11 cases, their involvement in mediation is vital.
Genesis maintains that their zero-claim estimation is critical to avoid delays and move forward promptly with the confirmation of their Chapter 11 plan. However, FTX argues that without their involvement, the mediation process is wasting estate resources.
In a separate development, on May 3, FTX, invoking bankruptcy laws that allow it to reclaim “avoidable transfers” within the 90-day period before bankruptcy is declared, sought nearly $4 billion from Genesis. FTX debtors have since requested that the court lift the automatic stay on legal proceedings against Genesis, a common measure in bankruptcy proceedings.
This motion is slated to be heard on June 15. It follows an announcement by Digital Currency Group (DCG), Genesis Capital’s parent company, that it couldn’t fulfil its outstanding intercompany obligations that would otherwise help repay creditors.
Meanwhile, DCG has been in a mediation period with Genesis in response to creditors’ demands. Earlier this year, the company suggested a settlement plan that would provide Genesis creditors with an 80% recovery of funds post Chapter 11 bankruptcy declaration.
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