In a legal document filed on Feb. 6, 2024, the crypto juggernaut, Digital Currency Group (DCG), voiced opposition to Genesis’ revised bankruptcy strategy for multiple concerns. DCG argues that the plan favors certain creditors over others unjustly, and the company’s legal team charges Genesis with violating their fiduciary responsibilities and presenting the proposal in bad faith.
DCG Raises Legal Concerns Over Genesis’ Bankruptcy Strategy, Seeks Plan Rejection
Attorneys from Weil, Gotshal, and Manges LLP, representing Digital Currency Group (DCG), have lodged a formal objection against Genesis‘ updated bankruptcy scheme, alleging it contravenes Section 1129 of the Bankruptcy Code. DCG argues the plan constitutes an impermissible “cramdown” that fails to align with legal standards for bankruptcy, purportedly allowing creditors to claim recoveries exceeding the values assessed at the filing date, among other infractions. Adding to the complexity, Genesis operates under the DCG umbrella.
DCG further argues that the scheme’s allocation rules are overly intricate and muddled, breaching certain established norms of bankruptcy legislation. The company maintains that these rules disproportionately benefit a select group of creditors at the expense of others, effectively depriving DCG of significant financial and governance rights. The legal team deems the preferential treatment of certain creditors through setoff rules and the modification of DCG’s rights as an equity holder to be against the law.
“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,” the court filing details. “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 attorneys add:
Because the amended plan was not proposed in good faith and violates numerous principles of law, it should be rejected.
DCG’s objection comes on the heels of Genesis seeking authorization to sell off $1.4 billion in Grayscale’s Bitcoin Trust (GBTC). This move was promptly lauded by the New York-based Gemini, which called it an “important step” toward settling. In the court document filed on Tuesday, DCG expressed disapproval of the process used to craft the revised plan, criticizing it as the outcome of alleged secretive talks that left DCG out and unjustly advantaged certain creditors to the detriment of DCG.
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