Gemini Earn to begin returning customers' crypto by end of month as court approves Genesis bankruptcy

Genesis, the bankrupt crypto lender that collapsed in the wake of the failure of the Terra/luna ecosystem and Three Arrows Capital, won approval for its bankruptcy plan in U.S. court yesterday, with a judge overruling Genesis owner Digital Currency Group's (DCG) objection. 

U.S. bankruptcy judge Sean Lane brushed aside complaints by DCG, the Genesis Crypto Creditors Ad Hoc Group, and the Office of the United States Trustee before ruling in favor of the plan, which will return about $3 billion in cash and assets to creditors. 

DCG had argued that claims should be valued in U.S. dollars at the time of the company's bankruptcy filing in January 2023, bypassing nearly a year and a half of gains across the crypto sector. 

In his ruling, Judge Lane rebuked the complaint, writing, "...DCG has objected to a plan in which it has no economic stake. The record here clearly establishes that there is not sufficient value in the Debtors’ estates to provide DCG a recovery as equity holder after unsecured creditors are paid." 

The plan provides for "a multi-step process that allocates assets to creditors by claim denomination and values these assets for distribution purposes"—put simply, creditors owed cryptocurrency will be treated differently than those owed U.S. dollars.

Judge Lane also noted "...due to the increase in price of digital assets after the time a resolution was reached, it is currently anticipated that those creditors whose claims are denominated in U.S. dollars will be receiving 100% of their loan balance (deferring payment of post-petition interest)" while creditors with claims in cryptocurrency will bear the shortfall in funds. 

While DCG may be able to appeal the ruling, according to Bloomberg, it's unclear what legal justification they'd have for doing so given the overwhelming shortfall in assets. 

Gemini Earn to begin reimbursements

Following the news, Winklevoss twin-owned exchange Gemini released a statement calling the ruling a "welcome decision," before noting that "...it does not impact the global settlement among Gemini, Genesis, and other creditors in the Genesis Bankruptcy previously approved by the Bankruptcy Court."

As part of the deal regarding Gemini Earn, creditors will begin receiving the assets owed to them starting by the beginning of the month, the company announced. Approximately 97% of owed funds will be initially repaid, the company said, and the payments will take the form of in-kind reimbursements, meaning a customer who deposited one bitcoin into Gemini Earn will receive that Bitcoin back, rather than the U.S. dollar value of the token at a given date. 

This sets Gemini's bankruptcy response apart from that of FTX, which will reimburse customers of the dollar value of their claims at the time FTX filed for bankruptcy, according to the current plan.