Genesis Lawyers are set to face the challenge of reversing the clawback of $3.9 billion by FTX (FTX Debtors) due to the looming default of their parent company, the Digital Currency Group (DCG). FTX is seeking a return of the money they paid to Genesis within ninety days prior to their bankruptcy. Lumida Wealth Management CEO Ram Aluwaia believes that Genesis can avert the clawback by affirming that their payments were controlled by the 'ordinary course of business'. On the other hand, John J. Ray III, the trust for FTX is unlikely to favor this argument.
In courts, the creditor (Genesis) needs to refute any allegations that the repayments were irregular for a normal debt recovery situation. Views on what constitutes an ‘ordinary’ transaction are diverse, and one argument which would likely be persuasive is to incorporate the practices which are typically meted out by similar businesses. Thus, an expert witness would be called upon to demonstrate that the creditor was within the boundaries of a regular B2B transaction. Nevertheless, the court shall pass its judgment on the 25th of May 2021.
Regardless of the outcome, creditors of Genesis are unlikely to receive repayment immediately, as it is expected to be a prolonged process. Genesis expanded its loans to $130.6 billion during the 2021 Bull Market for several companies, some of which include Alameda Research and Three Arrows Capital. Voyager Digital borrowed funds from Alameda, which had borrowed from FTX and collateralized its transactions using illiquid FTT tokens.
DCG is expected to meet its payment obligations or form an agreement to avoid its default by May 9. As DCG owe Genesis $1.1 billion in a promissory note maturing in year 2032, a delay in repayments would undoubtedly impact the creditors of Genesis who are due $3.4 billion. To mitigate this situation, both Gemini Exchange and DCG had concurred over a compensation plan for Gemini’s Earn program customers. This may lead to the restructuring of Genesis’s debts and reprieve payments to their creditors.
Ivanna Patel
- 2023-05-08
will Genesis avert the $3.9 billion clawback?
Genesis Lawyers have to face a challenge of reversing a clawback of $3.9 billion owed by parent company Digital Currency Group. The court is to announce their judgment on the 25th of May 2021.
