Creditors of bankrupt crypto lender Genesis Global Capital (GGC) have hit out at a proposed $175 million deal with the defunct exchange FTX, accusing GGC of vote-buying to “manipulate” the bankruptcy process.
The Thursday filings present another headache for Genesis, which is hoping to wind up its affairs and start returning money to former customers.
After filing for bankruptcy in January, GGC has long wrangled over how to treat over a billion dollars owed by its parent company Digital Currency Group (DCG), and the tentative deal hasn’t pleased all the other creditors. DCG is also CoinDesk’s parent company.
A further legal deal filed by the two bankrupt companies in mid-August lets FTX’s Alameda Research claim $175 million on the Genesis estate – a significant drop from the $4 billion FTX originally sought – but other creditors aren’t happy with that either.
As bankruptcy plans must be voted on by creditors in proportion to their claims, creditors are effectively accusing Genesis of ballot-stuffing.
“[Genesis], by entering into the Proposed Settlement, have sought to buy the support of the FTX Debtors, and their votes,” said a Thursday filing by a set of creditors which calls itself the Fair Deal Group. “This is, of course, a perversion of the Chapter 11 process.”
A spokesperson for Genesis did not immediately respond to CoinDesk’s request for comment. Genesis’ counsel has previously said the FTX deal will “significantly smooth the path” to reorganizing the company without the cost of extended litigation.
A further “ad hoc” group of creditors said the bid by FTX to claw back loans from its “criminal enterprise” was “ unconscionable,” adding that FTX’s strategy in claiming billions against Genesis had been “no more than throwing spaghetti against the wall to see what sticks.”
The ad hoc group has not revealed its membership, but has previously said its members are owed a total $2.4 billion by GGC, constituting a majority of each class of claims.
Gemini and other creditors have previously opposed the DCG deal, and said that Genesis should be stripped of monopoly rights to propose a wind-up plan. In July, Gemini also sued DCG for what it said was “fraud” by Genesis, allegations which DCG in turn described as “defamatory” and a “publicity stunt.”
Bankruptcy Judge Sean Lane is due to consider the Genesis-FTX deal at a Sept. 6 hearing in the Southern District of New York.
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