Barry Silbert’s Digital Currency Group (DCG) has objected to the bankruptcy plan of its subsidiary Genesis Global Capital because it wants to pay back a group of controlling creditors more than required.
In a motion filed on Monday, DCG has said Genesis’ bankruptcy plan is unlawful, inequitable, and violates its rights.
Under bankruptcy law, payouts of digital assets are determined by price at the time the firm officially went under. Bitcoin, for example, was worth $21,000 when Genesis filed for bankruptcy on January 20, 2023.
At press time, however, bitcoin has appreciated by a whopping 105%, to over $43,000. Genesis has proposed to give “hundreds of millions of dollars more” to its general unsecured creditors in order to reflect this price change.
According to DCG, paying extra to a small group of premium customers is a violation of the bankruptcy code, displays “bad faith,” and, perhaps most telling, cuts into its own potential payouts.
What’s more, Genesis is accused of repeatedly withholding the names of these creditors and the exact figures of their payouts.
“If implemented as the Debtors intend, the Setoff Principles would provide a select group of only twenty-one creditors—presently unknown to the public due to the Debtors’ extensive redactions—with a collective windfall of [REDACTED] of additional claims, with one creditor to receive [REDACTED] of additional claims prohibited by law.
“The Court should not sanction this result,” DCG said.