Bankrupt crypto exchange FTX has strongly refuted claims that Genesis owes it no money. FTX alleges that it is a major creditor of Genesis; however, it was not invited to a mediation session arranged by the court in May. Genesis allegedly handpicked the participants in the mediation.
In a court filing, FTX expressed surprise at Genesis’ unexpected move to declare FTX’s unresolved claims worthless. Genesis justified this action as necessary to quickly move forward with the confirmation of a Chapter 11 plan. Earlier in May, FTX claimed that it is owed $3.9 billion in cash and cryptocurrency from Genesis, stating that “Genesis was one of the main feeder funds for FTX and instrumental to its fraudulent business model.”
On the other hand, Genesis argued that pursuing FTX’s claims through the regular legal process would cause unnecessary delays in managing its administrative process. They added that they aim to finalize a plan by August, before its requested extended exclusive period ends.
FTX has joined a group of other Genesis creditors who have submitted objections to extending the mediation process. These objections further complicate settlement discussions between Genesis, parent company Digital Currency Group (DCG), and its other creditors.
This development follows DCG’s recent failure to fulfill a $630 million payment owed to Genesis. Genesis wants to extend the discussions until June 16, and there will be a hearing on Monday to decide on this extension.
Genesis, which used to offer clients interest for lending their digital coins, stopped allowing withdrawals in November, partly due to its connection to FTX’s bankruptcy. It then filed for bankruptcy in January and has been trying to reach a settlement with its creditors. Long delays are causing some individual creditors to oppose more mediation attempts.
FTX states that “the mediation is a waste of estate resources without the inclusion of the FTX Debtors and should not continue without the FTX Debtors’ involvement.”
Overall, the situation presents a complex dilemma. On one hand, Genesis argues that addressing FTX’s claims would prolong the legal process and prevent them from efficiently managing their administrative matters. On the other, FTX and other creditors, whose claims have not been addressed, argue that the mediation process is a waste of resources without their involvement. The outcome of the hearing on the extension of discussions will have significant implications for the future of FTX, Genesis, and their creditors.
Source: Blockworks
