On February 1, FTX made a significant move by filing a motion in a Delaware court, seeking approval to sell its claim of $175 million against the bankrupt digital financial services firm, Genesis Global Capital.
This claim was initially asserted by Alameda Research, a hedge fund affiliated with the now-bankrupt cryptocurrency exchange, FTX.
FTX is exploring the option of selling the claim, either in its entirety or in parts, and at various times, in order to maximize its returns.
Currently, claims against Genesis are trading at 65% of their face value, a significantly higher price compared to the 38% that Alameda Research’s claims are fetching.
The motion submitted to the court requests approval of a sales procedure that would apply to all sales, streamlining the process and minimizing the need for separate motions for each proposed sale.
According to this procedure, the sale price must be at least 95% of the highest price quoted by leading market-makers for general unsecured claims of GGC on a reference date within three days of the sale date.
The proposed sale order emphasizes that this action is in the best interests of the Debtors, their estates, creditors, interest holders, and all other parties involved.
Interested parties have until February 15 to voice any objections to the sale of the claim.
It’s worth noting that FTX had initially sought to recover $3.9 billion from Genesis in May 2023, as permitted by bankruptcy law.
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However, the negotiated claim of $175 million was reached between FTX and Genesis in August 2023 and was subsequently approved by the court in October. During that time, other claims FTX had against Genesis were nullified.
The decision to settle for a significantly lower sum was based on the argument that the potential for recoveries was unpredictable, and opting for a settlement allowed both parties to avoid protracted and costly litigation, the outcome of which would also have been uncertain.
FTX faced a crisis in November 2022 when irregularities were discovered in its account books. At that time, Genesis had $175 million tied up in its FTX account, although Genesis asserted that this did not impact its market-making activities.
Genesis Global Capital, a subsidiary of the Digital Currency Group, filed for bankruptcy in January 2023, leading to an extended dispute with the Gemini cryptocurrency exchange.
Genesis had been managing the Gemini Earn program, which was affected when Genesis suspended withdrawals.
Recently, on February 1, Genesis reached a $21 million settlement with the United States Securities and Exchange Commission (SEC) regarding the Gemini Earn program.
A court hearing scheduled for February 14 in New York will evaluate Genesis debtors’ proposed bankruptcy reorganization plan and the inclusion of the SEC settlement within it.
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