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Highlights
- DCG objects to Genesis Global's settlement with the NYAG, citing legal concerns.
- The settlement is criticized for favoring preferred creditors and bypassing bankruptcy laws.
- DCG claims the agreement was hastily made without proper transparency.
Digital Currency Group (DCG) has opposed the settlement arrangement between the New York Attorney General (NYAG) and Genesis Global, a cryptocurrency lender that has only recently filed for bankruptcy. The settlement, which results from the charges of investor fraud that were filed against Genesis, has been criticized by DCG, the parent company of Genesis, for not following proper legal processes. In a recent filing with the U.S. Bankruptcy Court Southern District of New York, DCG contended that the agreement wrongfully diverted value to preferred creditors, circumventing the long-accepted priority regime.
The point made by DCG reflects fears about the settlement failing to comply with U.S. bankruptcy law, thus making it look like a way to bypass the legal procedure related to bankruptcy. However, DCG’s statement, published on Wednesday, stressed the company’s opinion that the settlement had been haphazardly and secretly created, compromising the rules of justice and the right to their observance. This turns another dimension to the legal issues that Genesis and its related companies deal with in the cryptocurrency world.
DFS Enlarges Accusations on DCG and Gemini.
The Genesis settlement controversy is one of numerous legal and regulatory challenges faced by the company and its parent, DCG. Before this challenge, Genesis supported the Department of Financial Services of New York (DFS) and agreed to an $8 million fine for giving up its New York BitLicense. The settlement was a result of accusations regarding the company’s activities as well as its compliance with the state’s finance laws.
Adding to the confusion, DFS has increased its allegations against DCG and another GCG affiliate, Gemini, accusing them of causing investor losses, now at $3 billion. These losses are related to the Gemini Earn program, which has faced increased scrutiny and legal action by state regulators. The increasing legal actions point to the changing nature of the cryptocurrency market and the regulatory environment in which these entities function. The initiatives of the NYAG and DFS highlight the increased regulatory attention on the cryptocurrency segment, especially in the aftermath of the failures and allegations of misconduct.
Objections Rise Against Genesis Capital Bankruptcy Plan
Genesis Capital’s efforts to steer through bankruptcy have faced marked opposition from DCG, particularly in relation to the proposed settlement plan with the creditors. DCG’s objection, submitted on February 5, concerns that the proposed plan does not follow standard bankruptcy procedures, which usually require all creditors to receive the same treatment. DCG’s filings argue that the plan proposed by Genesis unfairly favors certain creditors at the expense of others, including DCG itself, thereby violating the Bankruptcy Code.
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