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FTX, the bankrupt cryptocurrency exchange, has filed a motion in a Delaware court to sell its $175 million claim against Genesis Global Capital, which is also facing bankruptcy. The claim originates from the exchange’s associated hedge fund, Alameda Research, and represents a crucial step in the company’s efforts to manage its bankruptcy proceedings effectively.
FTX Moves to Liquidate Genesis Claim
FTX’s motion, filed on February 1, seeks the court’s approval to sell the claim in whole or in part, and at potentially different times, to capitalize on the most favorable market conditions. Currently, claims against Genesis are trading at 65% of their face value, a rate significantly higher than the 38% that Alameda Research claims are fetching in the market. This disparity underscores the perceived value and market confidence in Genesis-related claims compared to those associated with Alameda Research.
The Path to Settlement
The proposed sales procedure outlined in the motion aims to streamline the process, eliminating the need for separate motions for each sale and ensuring that the sale price meets or exceeds 95% of the highest price quoted by leading market-makers for Genesis’ unsecured claims. This procedure is designed to benefit FTX’s estate, its creditors, interest holders, and all other parties involved, by alleviating costs and delays.
The FTX Debtors entered a Global Settlement Agreement with the Joint Official Liquidators on behalf of FTX Digital Markets Ltd. Read more here: https://t.co/cf5pbFvcEV — FTX (@FTX_Official) December 19, 2023
The court has set a deadline of February 15 for objections to the sale, highlighting the urgency and importance of this motion to the exchange company’s bankruptcy proceedings. The claim itself was a result of negotiations between FTX and Genesis, culminating in a court-approved settlement in October 2023, significantly reducing FTX’s initial clawback attempt from $3.9 billion to $175 million. This reduction was justified by both parties as a means to avoid unpredictable recoveries and costly litigation.
The backdrop to this motion is the tumultuous collapse of FTX in November 2022, following the discovery of financial irregularities. At the time of its downfall, Genesis had $175 million tied up in FTX accounts, a situation it claimed did not affect its market-making activities. Genesis’ bankruptcy in January 2023 further complicated matters, especially its dealings with the Gemini cryptocurrency exchange and the Gemini Earn program.
Moreover, Genesis reached a $21 million settlement with the U.S. Securities and Exchange Commission on the same day the exchange company filed its motion, regarding issues related to the Gemini Earn program. A New York court hearing scheduled for February 14 will consider Genesis debtors’ proposed bankruptcy reorganization plan, including the SEC settlement, indicating the intricate and interconnected challenges facing the cryptocurrency industry today.
This series of events underscores the volatile nature of the cryptocurrency market and the complex legal and financial maneuvers companies must navigate in the face of bankruptcy and regulatory scrutiny. The outcome of FTX’s motion and the subsequent court hearing for Genesis will be closely watched by investors and industry observers alike, as they could set precedents for handling similar cases in the future.
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