FTX Court of Appeals to sell DCG’s $175M claim to Genesis Trading

FTX filed a motion in Delaware court on Feb. 1 to sell its $175 million claim against bankrupt digital financial services firm Genesis Global Capital. The claim was made by hedge fund Alameda Research, an affiliate of the bankrupt cryptocurrency exchange.

If accepted, FTX may sell the claim in whole or in part and at different times to take advantage of the best conditions. Claims on Genesis currently sell for 65% of their face value, much higher than the 38% of Alameda Research's claims.

The petition calls for the adoption of a sales procedure applicable to all sales to alleviate “the expense and delay of filing a separate motion for each proposed sale.” The sale price must be at least 95% of the “highest GGC claim on the reference date quoted by one or more leading market makers” within three days of the sale date. The proposed sales order reads:

“The entry of this order is in the best interest of the borrowers and their estates, creditors, interest holders and all interested parties.”

Objections to the sale of claims can be made until February 15.

FTX sought to recoup $3.9 billion from Genesis in May, as allowed by bankruptcy law. The $175 million claim was settled between FTX and Genesis in August and approved by the court in October. Other claims against Genesis by FTX were dismissed at the time.

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The parties justified the reduced sum by arguing that the likelihood of recovery was unpredictable and that the outcome was unpredictable, avoiding lengthy and costly litigation.

FTX collapsed in November 2022 after irregularities were discovered in its accounts. At the time, Genesis had $175 million tied up in its FTX account, but said that did not affect its market performance.

Genesis, part of the Digital Currency Group (DCG), which filed for bankruptcy in January 2023, sparked a long-running conflict with the Gemini cryptocurrency exchange. Genesis manages the Gemini Earn program, which took effect when Genesis stopped cashing out. Genesis reached a $21 million settlement with the United States Securities and Exchange Commission on February 1 regarding Gemini Earn.

A court hearing will be held in New York on February 14 to consider the proposed bankruptcy reorganization plan by Genesis' creditors and the inclusion of the SEC settlement.

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