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- 1 FTX is now demanding that Genesis Global Capital return $3.9 Billion in fiat and cryptocurrency.
- 2 FTX has filed a “Notice of Motion,” that states Genesis “has a few defenses” against the $3.9 Billion claim from FTX.
- 3 It must be noted that the crypto exchange collapsed in November 2022.
The lawyers of FTX, the defunct crypto exchange, filed a lawsuit on Wednesday, May 3rd, in the U.S. Bankruptcy Court for the Southern District of New York. As per its filing, FTX is attempting to find about $3.9 Billion of fiat and cryptocurrencies from Genesis Global Capital, the digital assets lender.
By this motion filing, FTX is complicating Genesis’s negotiations with its creditors. If the digital assets lender can’t figure out a repayment deal within the given time period then its parent company, Digital Currency Group (DCG), may default on some of its obligations, as Gemini stated. Gemini is another crypto exchange that is a creditor of Genesis.
Moreover, to the specified funds, the claim added $213 Million seized by the parent company Genesis Global Capital (GGC) International, a $1.8 Billion loan from Alameda Research, and a collateral of $273 Million for that same loan.
In between many claims, there is a fact that Genesis is allegedly one of the key “feeder funds,” which was part of the FTX-Alameda fraud scheme. Genesis has obtained an “unfair advantage” by emptying its accounts shortly before the company’s liquidation. In this particular case, the lawyers are using the term “avoidable transfers,” while FTX is indeed within its rights.
FTX’s Demand from DCG’s Genesis
According to a Forbes report published on May 6th, the lawyers for FTX aimed “to claw back funds received by Genesis and non-debtor affiliates.” It further continued that the funds would be “used to help compensate all of the FTX creditors in its own bankruptcy case.”
The crypto exchange’s demand from Genesis further includes $1.6 Billion that the lender withdrew from the platform prior to the bankruptcy of FTX. Now, FTX is insisting on the return, and citing the principle that some creditors should not receive unjustifiable advantages over others.
However, a bankrupt can request the return of funds that were withdrawn within 90 days of the liquidation. This initiative is part of FTX’s global strategy under new management to accumulate assets from bankrupt firms. As FTX has sold the portfolio organization LedgerX for $50 Million. Additionally before that the company returned capital in the amount of $7.3 Billion.
As Forbes reported, on the FTX’s motion, the court hearing scheduled for May 25th could shed more light on the legitimacy of this preference demand. Meanwhile, “a preference demand makes it possible to request for the return, or claw back, of payments made by a debtor to third parties in the 90 days prior to a bankruptcy filing.”
In a statement to Forbes, Genesis said “it remains focused on its restructuring process.” While the lawyers for FTX have not returned a request for comment.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
