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Bitcoin Behemoth Takes Aim With DCG Challenging Genesis’ “Favoritisms” in Bankruptcy

Last Updated February 8, 2024 1:12 PM
Teuta Franjkovic
Last Updated February 8, 2024 1:12 PM

Key Takeaways

  • DCG claims Genesis’ revised plan violates the bankruptcy code, favoring some creditors unfairly.
  • The group criticized the plan’s complicated allocation rules, arguing they lack transparency and violate legal principles.
  • Even with Gemini’s support, DCG objects to the proposed GBTC sale, suggesting it benefits certain creditors.

Digital Currency Group (DCG) formally expressed  its objections to a modified bankruptcy plan proposed by Genesis, citing a variety of issues.

DCG contends that the strategy improperly advantages specific creditors at the expense of others and accuses Genesis of breaching its fiduciary duties and proposing the plan without genuine intent.

DCG Challenges Genesis’ Bankruptcy Plan for Legal Noncompliance

Lawyers from Weil, Gotshal & Manges LLP, on behalf of Digital Currency Group (DCG), have officially  contested Genesis’ revised bankruptcy proposal, claiming it violates specific provisions of Section 1129 of the Bankruptcy Code.

The parent company of Genesis, DCG criticized the plan  as a prohibited “cramdown” that does not meet established bankruptcy legal standards, allegedly enabling creditors to secure recoveries beyond the initially assessed values, along with other legal violations. The situation is further complicated by Genesis’ position as a subsidiary within the DCG corporate family.

DCG contends  that the proposed allocation guidelines of the bankruptcy scheme are excessively complex and unclear, violating recognized bankruptcy law principles.

DCG Fights Bankruptcy Plan Accused of Favoring Creditors

According to DCG, these guidelines unfairly favor certain creditors over others, thus stripping DCG of critical financial and governance rights. The firm’s legal representatives argue that the plan’s preferential treatment for some creditors is unlawful.

According  to the court filing:

“The amended plan also seeks to disenfranchise DCG in a myriad of other ways, including stripping DCG of essentially all its rights in its capacity as an equity holder with no legal authority to do so. In short, the amended plan renders DCG an equity holder in name only. This kind of naked seizure of equity holder rights in direct contravention of law and public policy is the very definition of bad faith.”

The DCG lawyers added  that the amended plan should be rejected due to it not being proposed in good faith and its violation of numerous legal principles.

Criticizing Genesis’ Revised Plan Amid $1.4 Bn GBTC Sale Proposal

Digital Currency Group (DCG) raised objections to Genesis’ request for approval to sell $1.4 billion worth of Grayscale’s Bitcoin Trust (GBTC) shares, a decision praised by New York-based Gemini as a crucial move towards resolution. The group also voiced concerns over the methodology behind the revised bankruptcy plan, condemning it as the product of purported clandestine negotiations that excluded DCG. The company argues that these discussions unfairly favored specific creditors at the expense of DCG’s interests.

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