FTX Challenges Genesis’ Zero Debt Claim
FTX alleges Genesis owes $3.9 billion in cash and crypto, as major feeder fund enabling fraudulent business model
mundissima/Shutterstock, modified by Blockworks
Bankrupt crypto exchange FTX has strongly refuted claims that Genesis owes it no money.
FTX claims that it is a major creditor of Genesis but was not invited to a mediation session arranged by the court in May. Genesis allegedly handpicked the participants in the mediation.
In a court filing published Friday, FTX indicated it was surprised at Genesis’ unexpected move to declare FTX’s unresolved claims worthless. Genesis justified this action as necessary to quickly move forward with the confirmation of a Chapter 11 plan.
Earlier in May, FTX said it is owed $3.9 billion in cash and cryptocurrency from Genesis. “Genesis was one of the main feeder funds for FTX and instrumental to its fraudulent business model,” attorneys for FTX wrote.
But Genesis argued that pursuing FTX’s claims through the regular legal process would cause unnecessary delays in managing its administrative process. Genesis added that it aims to finalize a plan by August, before its requested extended exclusive period ends.
FTX has joined a group of other Genesis creditors who have submitted objections to extending the mediation process. These objections further complicate settlement discussions between Genesis, parent company Digital Currency Group and its other creditors.
This development follows DCG’s recent failure to fulfill a $630 million payment owed to Genesis.
Genesis wants to extend the discussions until June 16, and there will be a hearing on Monday to decide on this extension.
Genesis, which used to give clients interest for lending their digital coins, stopped allowing withdrawals in November, partly due to its connection to FTX’s bankruptcy. It then filed for bankruptcy in January and has been trying to reach a settlement with its creditors. Long delays are making some individual creditors oppose more mediation attempts.
“The mediation is a waste of estate resources without the inclusion of the FTX Debtors and should not continue without the FTX Debtors’ involvement,” FTX says.
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