The high-profile legal dispute between bankrupt cryptocurrency exchange FTX and crypto lender Genesis appears to be nearing resolution, according to a recent court filing.
FTX, which filed for Chapter 11 bankruptcy protection last November following allegations of mishandled customer funds, had filed a motion in May 2022 seeking to recover nearly $3.9 billion in assets from Genesis. FTX claimed that Genesis had received “avoidable transfers” of funds from FTX prior to its collapse.
Genesis rejected the claims, stating that it did not owe FTX any funds. The crypto lender subsequently filed its own bankruptcy case in November, citing losses from its exposure to FTX as a key factor in its financial troubles.
The ongoing legal battle threatened to complicate and delay bankruptcy proceedings for both companies. However, a letter filed in the U.S. Bankruptcy Court for the Southern District of New York indicates that a settlement has been reached.
“The parties have reached an agreement in principle, subject to documentation, regarding a settlement that would resolve, among other things, the claims asserted by the FTX debtors against the debtors in these Chapter 11 Cases and the claims asserted by the Genesis debtors against the FTX debtors in the FTX Chapter 11 cases,” the letter stated.
While details of the settlement were not provided, FTX had previously reduced its claimed amount from Genesis to $2 billion. The settlement therefore appears to involve FTX recovering a significant portion of funds from Genesis, although likely not the full original amount sought.
Resolving the dispute removes a major obstacle for both companies as they attempt to navigate the bankruptcy process. Creditors for each firm can now have more confidence on the asset recovery outlook.
However, Genesis still faces other lawsuits related to its collapse. Cryptocurrency exchange Gemini, a major Genesis lender, sued Genesis parent company Digital Currency Group (DCG) and its CEO Barry Silbert in July 2022, alleging breach of contract and seeking damages.
According to Gemini, DCG and Silbert engaged in “fraudulent transfers” of funds that harmed lenders like Gemini. Genesis owes Gemini approximately $900 million in outstanding loans.
The settlement with FTX is therefore an important step for Genesis, but does not fully resolve the legal challenges facing the crypto lender as it works through bankruptcy. The ongoing lawsuit from Gemini poses additional risks.
Still, the FTX settlement will be seen as a positive development by Genesis creditors and will likely accelerate the bankruptcy process. It removes a major dispute that could have taken significant time to litigate.
For FTX, the settlement represents the recovery of substantial assets that can help pay back creditors. While the collapsed exchange still faces many legal and financial hurdles, the deal with Genesis resolves one of its largest single creditor claims.
Overall, the agreement shows that progress is being made in unraveling the complex web of relationships between failed crypto firms FTX and Genesis. With a major claims dispute now settled, the path ahead appears a little less uncertain for creditors seeking to recoup losses.