FTX has filed a motion in a Delaware court on February 1 to sell its $175 million claim against the bankrupt digital financial services firm, Genesis Global Capital. The claim was initially made by Alameda Research, a hedge fund associated with the bankrupt cryptocurrency exchange, FTX.
The motion, if approved, would allow FTX to sell the claim in whole or in part, and at different times, to take advantage of favorable conditions. Currently, claims against Genesis are selling for 65% of their face value, significantly higher than the 38% that Alameda Research claims are fetching.
The motion also requests approval for a sales procedure that would apply to all sales, reducing the cost and delay of filing separate motions for each proposed sale. The proposed sale order stipulates that the sale price must be at least 95% of the highest price quoted by leading market-makers for general unsecured claims of Genesis Global Capital on a reference date within three days of the sale.
Objections to the sale of the claim can be submitted until February 15.
FTX originally sought to recover $3.9 billion from Genesis in May, as permitted under bankruptcy law. However, the claim was later negotiated down to $175 million between FTX and Genesis in August and approved by the court in October. Other claims against Genesis by FTX were expunged at that time.
The reduction in the claim amount was justified by both parties on the grounds that the potential for recoveries was unpredictable, and the settlement helped avoid prolonged and costly litigation with unpredictable outcomes.
FTX experienced a collapse in November 2022 after irregularities were discovered in its account books. At that time, Genesis had $175 million tied up in its FTX account, but it stated that this did not impact its market-making activities.
Genesis Global Capital, a subsidiary of Digital Currency Group (DCG), filed for bankruptcy in January 2023, leading to a protracted dispute with the Gemini cryptocurrency exchange. Genesis managed the Gemini Earn program, which was affected when it halted withdrawals. On February 1, Genesis reached a $21 million settlement with the United States Securities and Exchange Commission regarding Gemini Earn.
A court hearing is scheduled in New York on February 14 to consider the Genesis Debtors' proposed bankruptcy reorganization plan, including the SEC settlement.