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Genesis eyes fast resolution to creditor disputes and bankruptcy exit in May

January 24, 2023 Coin Telegraph

Bankruptcy

A lawyer for Genesis is optimistic it can resolve creditor disputes before the week is out while the firm could exit bankruptcy proceedings in four months.

A lawyer for bankrupt crypto lending firm Genesis is optimistic the firm can resolve its creditor disputes as early as this week and the company could come out of Chapter 11 proceedings by late May.

Genesis’ lawyer Sean O'Neal made the comments at a Jan. 23 initial hearing at the United States Bankruptcy Court for the Southern District of New York, according to a Reuters report.

He added Genesis had "some measure of confidence" it would resolve disputes with creditors by the end of the week and, if needed, would look for the judge to install a mediator, but said:

"Sitting here right now, I don't think we're going to need a mediator. I'm very much an optimist."

Genesis filed for Chapter 11 bankruptcy on Jan. 19. At the time it already had a restructuring plan along with a path pursuing a “sale, capital raise, and/or an equitization transaction" so it could potentially “emerge under new ownership.”

The bankruptcy comes nearly two months after Genesis suspended withdrawals in November 2022 citing market turbulence caused by the bankruptcy of crypto exchange FTX.

A series of "first-day" motions, standard in bankruptcy proceedings, were granted by Judge Sean Lane to Genesis which included allowing the firm to pay employees and vendors.

Lane added Genesis did not need to reveal customer names on its creditor's list, citing privacy concerns. Lane even suggested the lender warn users about possible phishing scams if the names are later made public.

Genesis said it will sell its assets at auction with a plan to exit its bankruptcy in a little under four months on May 19.

It reported having just over $5 billion in assets and liabilities and owes over 100,000 creditors at least $3.4 billion. Genesis’ withdrawal suspension last year impacted users of a yield-bearing product it managed called “Earn” from the Gemini exchange.

Gemini is Genesis’ largest creditor and is owed nearly $766 million.

Its largest debtor was its parent company, Digital Currency Group (DCG), which owes Genesis around $1.65 billion inclusive of $575 million of loans due in May and a $1.1 promissory note maturing in 10 years' time.

Even though DCG is facing its own financial troubles — the bankruptcy did not include DCG. Similarly, the Genesis entities handling derivatives, spot trading, broker-dealer and custody are not part of the proceedings and are continuing operations according to Genesis.

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Novogratz’s Galaxy Digital to acquire Celsius’ GK8 in bankruptcy garage sale

December 5, 2022 Coin Telegraph

Bankruptcy

The self-custody platform was acquired by Celsius in 2021 for $115 million and is now set to change hands, pending approvals.

Mike Novogratz-led investment firm Galaxy Digital Holdings has won the bidding to buy GK8, an institutional digital asset self-custody platform owned by Celsius Network — pending court approvals and certain closing conditions.

According to a Dec. 2 blog post from GK8 and a press release from Galaxy, if the acquisition goes ahead, Galaxy will acquire the platform's nearly 40-strong team as part of the deal including cryptographers and blockchain engineers and an office in Tel Aviv.

GK8 is a self-custody platform for managing blockchain-based assets which offers custody, staking, DeFi, NFT support, tokenization and trading.

The team behind the platform claims it can run secure blockchain transactions without being connected to the internet, severely reducing the risks of hacks.

Celsius acquired GK8 in 2021 for $115 million, though Galaxy has not disclosed how much it offered during the bidding process.

Mike Novogratz, founder and CEO of Galaxy called the acquisition a “crucial cornerstone in our effort to create a truly full-service financial platform for digital assets.”

"Adding GK8 to our prime offering at this pivotal moment for our industry also highlights our continued willingness to take advantage of strategic opportunities to grow Galaxy in a sustainable manner," he added.

Galaxy intends to support GK8's ongoing operations while utilizing its technology to develop its trading platform GalaxyOne it said.

GK8 founders, including CEO Lior Lamesh and CTO Shahar Shamai, are expected to stay with the company and lead Galaxy's new custodial business.

"With the backing of Galaxy, we aim to introduce new and exciting offerings to the industry that showcase a combination of Galaxy's best-in-class services and GK8's cryptography, security, and unparalleled R&D skills," Lamesh said.

Celsius has been undergoing bankruptcy proceedings since filing for Chapter 11 bankruptcy protection on Jul. 13, discussing plans to sell some of its assets.

In the court filing, Celsius CEO Alex Mashinsky indicated the company could sell Bitcoin (BTC) mined by its mining operation to help repay at least one of its loans and provide revenue for the company in the future.

While in a Sept. 15 filing with the United States Bankruptcy Court for the Southern District of New York, Celsius asked for permission to sell its stablecoin holdings.

Galaxy Digital was recently named in a $100 million lawsuit by institutional crypto custodian service and wallet operator BitGo for dropping its plans to acquire the firm.

Galaxy terminated the May, 2021 agreement to acquire the firm on Aug. 15, 2022, citing a breach of contract by BitGo when it allegedly failed to deliver audited financial statements by July 31, 2022.

BitGo then revealed in Sept. 13 post that it was seeking more than $100 million in damages, accusing Galaxy of “improper repudiation” and “intentional breach” of its acquisition agreement with BitGo.

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