Digital Currency Group (DCG), a prominent cryptocurrency investment firm, has alleged that the creditors of its bankrupt portfolio company, Genesis Global Trading, have reneged on a deal to return seized cryptocurrency assets to the company.
Genesis Global Trading filed for Chapter 11 bankruptcy in April 2020, citing difficulties acquiring approval from the US Securities and Exchange Commission (SEC). As part of the bankruptcy proceedings, the company’s creditors, including Silvergate Bank and Signature Bank, had seized a significant amount of cryptocurrency assets from Genesis.
Initially, the creditors had agreed to return the seized assets to Genesis, provided that the company would pay them 100% of the value of the assets. However, DCG alleges that the creditors later backtracked on this agreement, citing a lack of trust in Genesis’ ability to pay back the debt.
DCG alleges that the creditors’ actions have caused significant harm to Genesis’ business and reputation, as well as to the wider cryptocurrency industry. The investment firm claims that the creditors’ actions have discouraged potential investors from entering the space, due to concerns over the security and stability of cryptocurrency businesses.
In a statement, DCG CEO Barry Silbert said: “Our hope is that the creditors will recognize the harm they are causing and return the coins to Genesis so the business can continue its growth trajectory and create lasting value for all stakeholders.”
The allegations from DCG come amid growing concerns over the lack of regulatory oversight and legal protection for cryptocurrency investors and businesses. While the rise of digital assets has captured the attention of many investors, regulatory uncertainty and the risk of fraud have deterred others from entering the market.
The lack of clear guidelines from regulators has also contributed to the challenges faced by companies like Genesis. While the SEC has taken a number of actions against cryptocurrency issuers and exchanges in recent years, many investors, traders, and companies in the space remain uncertain about what actions are legally permissible.
In the case of Genesis, DCG alleges that the company was unable to obtain regulatory approval for its business model from the SEC, which led to its financial difficulties and eventual bankruptcy. The investors who seized the company’s assets reportedly did so because they feared that the company would be unable to repay its debts, due to its lack of regulatory approval.
The situation with Genesis underscores the need for greater clarity and protection for cryptocurrency investors and businesses, particularly as digital assets continue to gain mainstream acceptance. While there are promising signs of progress in the regulatory arena, with many countries beginning to develop frameworks for digital assets, more work needs to be done to ensure the security and stability of the industry.
For companies like Genesis, the allegations from DCG highlight the importance of strong relationships with creditors and other stakeholders, as well as a clear and well-communicated business strategy. As the industry continues to evolve, businesses that prioritize transparency, open communication, and responsible risk management will be best positioned to succeed in the long run.
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April 25 (Reuters) – Digital Currency Group (DCG) said on Tuesday some creditors of its bankrupt unit Genesis Capital have decided to walk away from a prior restructuring agreement for the cryptocurrency lender.
DCG, a conglomerate in the digital asset space, had been looking to sell Genesis to repay some of the $3.4 billion, at a minimum, it owes creditors.
It had, just two months, struck a deal that could have either resulted in a sale of Genesis or turned its equity over to creditors.
Since then, some creditors have since raised new demands, said DCG, which also owns the crypto news website, CoinDesk, and digital asset manager Grayscale.
“We will weigh any new demands against the concessions we have previously made,” it said.
Reporting by Jaiveer Singh Shekhawat in Bengaluru
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