{"id":549531,"date":"2023-02-09T00:40:15","date_gmt":"2023-02-08T21:40:15","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn\/"},"modified":"2023-02-09T00:40:15","modified_gmt":"2023-02-08T21:40:15","slug":"what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn\/","title":{"rendered":"# What creditors can expect from Genesis\u2019 bankruptcy \u2014 and what others can learn"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a40b62468770\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a40b62468770\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn\/#%E2%80%9D_What_creditors_can_expect_from_Genesis_bankruptcy_%E2%80%94_and_what_others_can_learn_%E2%80%9C\" >&#8221; What creditors can expect from Genesis\u2019 bankruptcy \u2014 and what others can learn &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn\/#The_Chapter_11_process_is_going_to_threaten_%E2%80%9Ccrypto_anonymity%E2%80%9D\" >The Chapter 11 process is going to threaten \u201ccrypto anonymity\u201d<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn\/#Individuals_make_an_unusual_appearance_among_unsecured_creditors\" >Individuals make an unusual appearance among unsecured creditors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn\/#Screenshots_of_account_balances_provide_support_for_claims\" >Screenshots of account balances provide support for claims<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn\/#Creditors_of_interest-bearing_accounts_will_find_it_harder_to_recover\" >Creditors of interest-bearing accounts will find it harder to recover<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_What_creditors_can_expect_from_Genesis_bankruptcy_%E2%80%94_and_what_others_can_learn_%E2%80%9C\"><\/span>&#8221; What creditors can expect from Genesis\u2019 bankruptcy \u2014 and what others can learn &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-4bbf85c5>The holding company of troubled crypto lender Genesis Global Capital, Genesis Global Holdco LLC, filed for Chapter 11 bankruptcy protection in New York on Jan. 19. Genesis is the latest crypto platform to file for bankruptcy, joining Celsius, Voyager, BlockFi and FTX.<\/p>\n<p>The <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>lication of Chapter 11 provisions to the crypto industry raises a <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/watch-movies-tv-seriess\/\" data-internallinksmanager029f6b8e52c=\"8\" title=\"Watch Movies &amp; TV Series\" target=\"_blank\" rel=\"noopener\">series<\/a> of new issues for courts. Here\u2019s a preview of what creditors can expect, and what casual observers can learn about the implications of a Chapter 11 process for an entity in the crypto industry.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_Chapter_11_process_is_going_to_threaten_%E2%80%9Ccrypto_anonymity%E2%80%9D\"><\/span>The Chapter 11 process is going to threaten \u201ccrypto anonymity\u201d<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Preserving the anonymity of creditors \u2014 a key feature of crypto \u2014 is at odds with the transparency of the Chapter 11 process, where creditor identities are <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly disclosed. Requiring the disclosure of customer names and certain account information presents risks for the creditor and the crypto entity: Individuals may be subject to hacking that exposes their wallet, while the crypto entity may be subject to scams, privacy law violations and client poaching attempts from rivals.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2023-02\/29e501ae-7605-4018-95fd-c96b35d2ca78.jpg\"><figcaption style=\"text-align: center;\"><em>Top 10 Genesis creditors. Source: Genesis bankruptcy filing &amp; Bloomberg<\/em><\/figcaption><\/figure>\n<p>When confronted with this issue, courts have taken divergent approaches. Take Celsius and Voyager, for example. With Celsius, the court rejected its request to seal the identities of European customers covered by United Kingdom and European Union data protection regulations, finding that those rules did not take precedence over United States bankruptcy law. However, with Voyager, the same court allowed it to redact customer information under the same European regulations.<\/p>\n<p>Despite this disparate treatment, a clear trend emerging is toward preserving anonymity \u2014 creditor names in the FTX and BlockFi cases remain under seal too \u2014 which is illustrative of how the Chapter 11 process is changing to adapt to the crypto space. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Individuals_make_an_unusual_appearance_among_unsecured_creditors\"><\/span>Individuals make an unusual appearance among unsecured creditors<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>An unsecured creditors\u2019 committee (UCC) comprises creditors holding uncollateralized claims whose role is to advocate on behalf of the interests of unsecured creditors. A UCC has wide latitude to investigate and advocate on key issues in the case, including the sale of assets and the creation of a restructuring plan.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Digital Currency Group\u2019s Genesis implosion: What comes next?<\/em><\/strong><\/p>\n<p>A UCC is typically made up of three to seven holders of the debtor\u2019s largest unsecured claims. In a large bankruptcy, the members are usually entities. The ongoing crypto bankruptcies are unusual in that despite their enormous size, the UCC members are primarily individuals. Only Celsius and FTX have entities on their committees, while Voyager\u2019s and BlockFi\u2019s UCCs are composed entirely of individuals. The composition of the Genesis UCC will likely follow a similar pattern.<\/p>\n<p>This deviation in UCC composition is illustrative of crypto exchange clientele \u2014 retail investors rather than big institutions. Individuals, however, may not have the same experience and resources as institutional investors when it comes to fulfilling their role in the UCC.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Screenshots_of_account_balances_provide_support_for_claims\"><\/span>Screenshots of account balances provide support for claims<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Chapter 11 creditors can submit a proof of claim \u2014 an official form indicating the amount of debt owed and the basis for the claim \u2014 with supporting documentation, which normally takes the form of promissory notes, invoices and contracts.<\/p>\n<p>Interestingly, crypto creditors have been attaching screenshots of their account balances to their proofs of claim. Aside from the unusual nature of this supporting documentation, some creditors may not have any documentation whatsoever. For instance, FTX creditors cannot access their account balances because the platform is offline. Reviewing unsealed proofs of claim reveal that prudent creditors took screenshots of their accounts before FTX became inaccessible, a step Genesis creditors would be advised to take as a precaution.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Creditors_of_interest-bearing_accounts_will_find_it_harder_to_recover\"><\/span>Creditors of interest-bearing accounts will find it harder to recover<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Once a debtor files for Chapter 11, all of its property as of the date of the filing becomes part of what is known as the \u201cbankruptcy estate.\u201d Determining what is part of the bankruptcy estate is crucial, as that is the property subject to administration in the case, which may be part of a sale, liquidation or reorganization.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Did dYdX violate the law by changing its tokenomics?<\/em><\/strong><\/p>\n<p>In these crypto bankruptcies, the determination of what account a creditor has \u2014 interest-bearing or custodial \u2014 is likely dispositive on the issue of recovery. The Bankruptcy Code makes a distinction between assets that are held in a customer\u2019s name alone (a typical crypto account) and those assets that have been commingled with other assets, as happens when assets are pooled and loaned out to generate income, which ostensibly was to be used to pay \u201cinterest\u201d to crypto account holders.<\/p>\n<p>Just a few weeks ago, the Celsius court ruled that the assets held in interest-bearing customer accounts belong to the bankruptcy estate, meaning recovery for those creditors is dependent on the outcome of the bankruptcy case. Conversely, BlockFi filed a motion to allow its custodial \u201cWallet\u201d account holders to withdraw funds because they are not the property of the debtor or bankruptcy estate. A ruling has not been issued.<\/p>\n<p>Genesis creditors who participated in the Gemini Earn program will likely face difficulty recovering their assets in light of the Celsius decision. Customers of Genesis wallet products may face a different fate if BlockFi\u2019s motion is successful.<\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Kaitlyn Devenyns<\/strong> is an attorney at Curtis, Mallet-Prevost, Colt &amp; Mosle LLP. She holds a law degree from Brooklyn Law School. <strong>Elisa Botero<\/strong> is an attorney for the firm and holds a law degree from Universidad de los Andes and an LLM from Columbia Law School.<\/div>\n<\/div>\n<p class=\"post-content__disclaimer\"><em>This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/what-creditors-can-expect-from-genesis-bankruptcy-and-what-others-can-learn\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; What creditors can expect from Genesis\u2019 bankruptcy \u2014 and what others can learn &#8220; The holding company of troubled crypto lender Genesis Global Capital, Genesis Global Holdco LLC, filed for Chapter 11 bankruptcy protection in New York on Jan. 19. Genesis is the latest crypto platform to file for bankruptcy, joining Celsius, Voyager, BlockFi&#8230;<\/p>\n","protected":false},"author":1,"featured_media":549532,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.cointelegraph.com\/uploads\/2023-02\/9496cf2d-11fe-4b75-be47-c6035a13df01.JPG","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74863,90192,74864,4978,117,71433,55229,67874],"class_list":["post-549531","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-cryptocurrencies","tag-digital-currency-group","tag-gemini","tag-bankruptcy","tag-business","tag-court","tag-law","tag-united-states"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/549531","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=549531"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/549531\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/549532"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=549531"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=549531"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=549531"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}