FTX To Recover Nearly $4B From Genesis Global Capital
Bankrupt cryptocurrency exchange FTX has filed a motion to claw back almost $4 billion from Genesis Global Capital, which also filed for bankruptcy earlier this year. Genesis, which is a subsidiary of Digital Currency Group, had lent nearly $8 billion to Alameda Research, an FTX-affiliated entity, in the weeks leading up to FTX’s bankruptcy in November. The motion stated that Genesis was largely repaid, with Alameda repaying $1.8 billion in loans to Genesis and pledging $273 million to Genesis in the 90 days before FTX’s bankruptcy.
FTX creditors demanded that the approximately US$4 billion obtained and withdrawn by Genesis from FTX within 90 days before FTX Group's bankruptcy be recovered and redistributed to creditors in accordance with the bankruptcy law. https://t.co/Av6pXbYXGk
— Wu Blockchain (@WuBlockchain) May 4, 2023
Recovering Withdrawn Funds from Genesis
In addition to this, Genesis had withdrawn $1.6 billion from FTX and its affiliate Genesis Global Capital International had withdrawn another $213 million during the same period. The motion filed by FTX is seeking to claw back these funds received by Genesis and non-debtor affiliates so that they can be shared with all other creditors of the FTX Debtors in the FTX Chapter 11 Cases. This includes several million customers who are owed over $11 billion at the time of filing of the FTX Chapter 11 Cases.
This legal action is known as “avoidance actions,” which allows a bankrupt entity to reclaim funds that were transferred before filing for bankruptcy. This action is typically taken to ensure that the assets of the debtor are shared fairly among all the creditors. The motion filed by FTX is a common move taken by companies that have filed for bankruptcy, but it could be complicated by the fact that Genesis has also filed for bankruptcy.
Boosting Restructuring Efforts
FTX’s bankruptcy filing last year came as a surprise to the cryptocurrency market, as the company had been viewed as one of the fastest-growing cryptocurrency exchanges. The company has since been working to restructure its debts and repay its creditors. The clawback of funds from Genesis will help to ensure that the company’s customers are repaid and will also be a significant boost to FTX’s restructuring efforts.
The cryptocurrency market has been volatile in recent months, with Bitcoin and other digital currencies experiencing significant price swings. This has led to some concerns about the stability of cryptocurrency exchanges, particularly those that are heavily leveraged. The legal action taken by FTX highlights the risks associated with trading on cryptocurrency exchanges and underscores the importance of ensuring that funds are held securely and that risks are properly managed.
