Court Grants Genesis Bankruptcy Settlement Request of $175M to FTX

Jimmy Aki
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A federal court has granted approval for a $175 million settlement between the now-defunct Genesis Global Trading and the FTX exchange. According to the court’s ruling, Alameda Research, an affiliate of FTX, is eligible to receive this specified sum, marking a substantial reduction from their initial claim of $3.9 billion.

Alameda Research to Claim $175M

On October 11, the United States Bankruptcy Court for the Southern District of New York granted a settlement agreement between bankrupt exchanges FTX and Genesis Global entity.

Screenshot of Court’s Bankruptcy Settlement File

Screenshot of Court’s Bankruptcy Settlement File

The $175 million settlement came after Judge Sean H. Lane issued approval on October 6 for both parties to resolve claims and reach an estimated value.

According to the latest court ruling, FTX has agreed to withdraw several other substantial claims against Genesis, which are about $3.9 billion in debts.

The ongoing litigation has seen a series of claims against Genesis withdrawn, including six from Alameda, six from West Realm Shires Services, and the defunct FTX exchange.

A court hearing has been scheduled for October 18, where objectors can argue against the settlement verdict before implementation.

An Oversight of FTX and Genesis Bankruptcy Ties

FTX filed for bankruptcy on November 11, 2022, which affected the global crypto industry, including Genesis.

Since 2019, Genesis and Alameda Research has engaged in extensive collateralized lending and borrowing operations.

The crypto lending firm used the FTX exchange as a repository for cryptocurrency and other digital assets, losing $175 million upon the liquidation of the exchange due to its derivatives business exposure.

This significant impact led Genesis to suspend all transactions in November 2022, proceeding with a Chapter 11 bankruptcy filing in January 2023.

On May 22, 2023, FTX filed a lawsuit against Genesis to reclaim a debt of $3.9 billion from its reported misappropriated funds of $8.7 billion.

According to the legal action, Genesis was a main feeder of funds for FTX and was instrumental to its deceptive business model.

The company’s debt was an aggregate of $1.8 billion in loans, a $1.6 million withdrawal before the collapse of FTX, $273 million in collateral, and $213 million its subsidiary reportedly withdrew.

After several months of litigation, Genesis agreed with FTX on June 27 to settle their claims for less than 5% of $3.9 billion.

Screenshot of FTX and Genesis in-principle agreement addressed to Judge Sean H. Lane.

Screenshot of FTX and Genesis in-principle agreement addressed to Judge Sean H. Lane.

The crypto lender filed a motion in its Chapter 11 bankruptcy case, pleading with the court to approve the settlement order. However, the court approved the settlement filing on October 6 and ruled against all debt objections against it.

FTX Nears Full Recovery of $8.7 Billion Fraud Scandal

Genesis’s settlement with the defunct FTX exchange came amid an ongoing trial of Sam Bankman-Fried (SBF), who is facing up to 13 charge counts, including money laundering, fraud, and bribery.

Since the collapse of the exchange, the new management of FTX has reported a recovery of over $7 billion from the estimated $8.7 billion misappropriated customer assets and funds.

On July 31, the exchange announced the first draft of a creditor payment plan for victims. It has also sued SBF parents over an active connection with the multi-billion dollar investment scheme.

The lawsuit filed on September 18 revealed that SBF parents, Joe Bankman and Barbara Fried, received cash gift donations worth $10 million and a $16.4 million luxurious home in the Bahamas from their son.

Further investigation also showed a connection to Standford University.

However, the University spokesperson stated that $5.5 million was received in cash gifts from FTX for pandemic-related prevention and releases.

However, the University has promised to cooperate with the FTX legal team and return funds donated to the institution.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.