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.
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.
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.
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.