Bankrupt cryptocurrency exchange FTX is seeking to recover billions of dollars from embattled crypto lender Genesis Global Capital.
FTX claims it acquired its assets from the cryptocurrency exchange ahead of other creditors before both companies filed for bankruptcy.
According to a May 3 court filing, FTX creditors are seeking nearly $4 billion from the crypto lender. Genesis, a subsidiary of Digital Currency Group (DCG), filed for Chapter 11 bankruptcy in January.
FTX’s bid for debt liquidation
The company explained that the company lent billions of dollars to Alameda Research but was “largely paid back” by the time the company collapsed.
The request stated that Alameda repaid $1.8 billion in loans to Genesis. Additionally, it pledged $273 million to Genesis in the 90 days before FTX collapsed.
Genesis pulled another $1.6 billion from FTX, and Genesis Global Capital International withdrew $213 million at the time.
FTX also alleged that Genesis was “one of FTX’s primary feeder funds and instrumental in its fraudulent business model.” Loans to Alameda totaled $8 billion in 2021, according to the reports.
According to a Genesis spokesperson, “The Company remains focused on our restructuring process, through which we are working towards a consensus solution that increases value for all Genesis customers and stakeholders.”
The filing stated that:
“The avoidance actions will seek to recover funds received by Genesis and its non-debtor affiliates so that those funds may be shared with all other creditors of FTX debtors in FTX Chapter 11 cases.”
It added that the creditors include “several million customers owed more than $11 billion at the time FTX Chapter 11 cases were filed.”
FTX stated that resolving the redemption claims will depend on legal questions “regarding the valuation of collateral and the FTT token as well as the payment practices of international retail cryptocurrency exchanges.”
The FTT token was used as collateral for some of the loans the lender had with Alameda. However, the exchange token collapsed after the fall of FTX and is currently still down 98.3% from its peak.
Genesis creditors reject the deal
In February, Genesis announced a proposed deal for DCG to contribute to a settlement that would reimburse its customers. However, some creditors withdrew from the restructuring agreement in late April.
DCG, which also owns Grayscale, had hoped to sell Genesis to pay back at least $3.4 billion owed to creditors.
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